The appraisal is based on research into recent sales of comparable homes in the area, an analysis of the property and the appraiser's judgment. The mortgage lender requires an appraisal to help assess the risk of granting a loan. Getting a home appraisal is a necessary step as a homeowner for both the buyer and the seller. As a buyer, a home appraisal will help determine how much the lender gives you and help you get a fair deal.
Home appraisals help determine the value of a home, which can help determine the sale price and help prepare a home for sale. Keep these five factors in mind as you prepare for your home appraisal. Lenders always require an appraisal of the home before issuing a mortgage because they want to protect their investment; if the real market value of a property is lower than the sale price and if the buyer does not pay the mortgage, the lender will not be able to sell the property for enough money to cover the loan. If you think the value of your home has been reduced by the sale price of nearby foreclosures and short sales, you may be able to convince the appraiser that your home is worth more if it is in significantly better condition than those properties.
The amount of time the entire process takes depends on the complexity of the assessment and the evaluator's workload or schedule. When refinancing a mortgage, if the appraised value places the equity in your home at less than 20%, you'll need to pay private mortgage insurance (PMI). Because the appraisal primarily protects the lender's interests, the lender will normally order the appraisal. Whether you're selling or buying a home, you're likely to run into a home appraisal contingency at some point.
An appraisal is an assessment of the value of the home, while an inspection examines the condition of the home. In response to the housing crisis, Freddie Mac, the Federal Housing Finance Agency and the New York Attorney General's office created the Housing Valuation Code of Conduct, which prohibited loan officers from selecting and communicating with appraisers, a provision that has since become a federal regulation. While you can't change the location of the property, you can do something about other factors that could lower the home appraisal. The fact is that evaluations are a bit subjective, and a clean house will generally rank much better in terms of overall condition than one that the inspector perceives as dirty.
While appraisals help buyers avoid overpaying for homes, a seller may think that a low appraisal is inaccurate and reluctant to lower the price. When you buy a home and it's under contract, the appraisal will be one of the first steps in the closing process. If your home were a book, its exterior appeal would be its cover, and both buyers and appraisers will judge it. When all goes well, the home appraisal is just another box to check on a closing checklist.
Your appraiser may not be very familiar with the homes in your neighborhood, so this is your opportunity to point out any added value in your property.