Published on December 15, 2016
If you are looking to buy, sell or refinance a home, the process can be enough to overwhelm anyone. By choosing a knowledgeable, high-quality lender who takes service seriously, it's easy to approach the process one step at a time. One key component of the process that is often overlooked, though, is the home appraisal. Whether you're moving into your first home or looking to secure a better rate on an existing home loan, an appraisal is likely in your future.
A home appraisal is a routine, standardized event that is intended to determine how much a home is worth, and therefore the cost of the mortgage to finance or refinance it. Real estate appraisals are conducted by professionals who are licensed and certified to perform this service in your area. Appraisers use their knowledge of the local market, combined with information on the home in question, to come to a determination of value. Although appraisers are typically hired by the lender, the applicant or homeowner is usually responsible for their fee, which can cost around $500.
"Appraisers generate an objective assessment of a home's value."
To conduct an appraisal, the appraiser will often need to visit the home in person to take a close look at the interior and exterior. He or she will also tap into public records or multiple listing services to find recent sales of similar homes nearby. These past sales, known as comparable properties or "comps," will serve as a benchmark for the final value determination. With all the requisite information gathered, the appraiser will create a report on the home's value. If a sale, the appraisal isn't available to the buyer, seller, and lender. In the case of a refinance, both the homeowner and the lender get a copy.
For sellers and refinancing homeowners, an appraisal on the horizon isn't cause for panic, but they should still take steps to prepare and ensure it goes as smoothly as possible. While appraisers are required by law to be fair and objective in their analysis of a home's value, there are several things homeowners or owners can do to make things easier for everyone involved.
In the days leading up to an appraisal viewing, homeowners should be sure they keep the place in good condition. Lawns should be mowed and gardens tended, and interior rooms should be kept tidy. Appraisers won't judge a home on cleanliness alone, but there's still no harm in taking the time to clean.
If homeowners want to go the extra mile, they can help the appraiser out by finding comparable sales. Take a look through online listings of recent home sales in the area and select properties similar to yours. Location and square footage are the most common factors used to determine similarity between two homes, but take note of building style, age and other features. Presenting the appraiser with three good comparable sales could help you make the case for a favorable appraisal.
When the time comes for the actual inspection, homeowners or buyers can be present but shouldn't intrude too much. Meeting with the appraiser and explaining the comparable sales you've found is perfectly acceptable. However, most appraisers appreciate space as they do their own inspection, so excessive questions or comments at this time are generally frowned upon.
With the inspection complete, both homebuyers and owners may have to wait up to a week before they can view the report. Once the appraisal decision has been finalized, borrowers are well on their way to securing a good loan with an excellent lender. Keep in touch with the lender for any lingering questions about the appraisal process.