Ins-and-outs of home appraisals

By RealtyCrunch IncApril, 30th 2020
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Ins-and-outs of home appraisals

A home appraisal is an assessment from an expert what the value of the home should be.

The appraisal is based on a few factors:

  • Recent sales of comparable properties in the area
  • Analysis of the property
  • Appraiser’s judgement

It’s a required document that allows a mortgage lender to fully understand the risk of making a loan. This is because in the case of default on the loan, the lender wants to know that the loan isn’t too big vs the property value.

Who is the appraiser?

An appraiser is someone who has the knowledge and expertise to come up with an estimate on the value of a property.

How much does it cost to get an appraisal?

It often is dependent on the value of the property, we have seen the typical range about $300-$600 for a home appraisal.

What are the key factors appraisers look for in a home?

When determining the value of a home, there’s a pretty standard process that all appraisers follow.

The Uniform Residential Appraisal Report, has a form you can fill out to answer questions about:

  • Neighborhood demographics
  • Housing trends in the area
  • Available utilities
  • Measurements and details about the home
  • Property conditions
  • How the house fits into the surrounding neighborhood

Exterior and internal factors appraisers consider:

Exterior Factors

  • Structure
  • Age
  • Location
  • Property site
  • Construction quality
  • Roof and foundation integrity
  • Gutters and siding
  • Parking
  • Exterior condition
  • Neighborhood

Internal Factors

  • Square footage
  • Functional layout
  • Number and size of bedrooms, bathrooms, and kitchens
  • Included utilities
  • Health and safety accouterments
  • Appliances
  • Interior condition
  • Structural integrity
  • Code compliance

How to choose the right home appraisal company

Making sure you have the right appraisal company is very critical when evaluating the home price.

The following tips will help you find the right appraisal company:

  • Look for someone with experience in appraising your property type
  • Request for recommendations
  • Ask questions based on your appraisal needs
  • Talk to many companies to see who’s most suitable for valuing the home
  • Confirm the appraiser’s license or certification

If you are getting a mortgage, the bank might require that you work with their appraisal company, or even choose from a selection of approved vendors.

What to do if my appraisal comes in below my offer price?

A lower appraisal price can be a bit of a pain with moving forward on the loan because the lender cannot lend more money than the home is worth.

However, don’t worry there’s no need to panic. There are a few solutions as a buyer to keep the deal alive:

  • Negotiate with the seller to decrease the price at or near the appraised value
  • Pay the difference between the appraised value and the selling price out-of-pocket

In the end, if you choose to walk away from the deal because none of the solutions above work.... there’s always the chance the seller drops the price of the home in the future or comes back to renegotiate with you. At the end of the day, if the property is appraised at a lower than asking price, more likely or not future buyers will have the same issue. Negotiate with the seller!