Lenders always require a home appraisal 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 fails to pay the mortgage, the lender will not be able to sell the property for enough money to cover the loan. Appraisals are beneficial to everyone involved in the homebuying process. For Buyers, Home Appraisal Ensures They Are Paying Today's Fair Market Value. For sellers, an appraisal helps them price their home competitively.
And for lenders, an appraisal provides proof that a home is properly valued before approving a mortgage. For purchases, lenders generally require appraisals to ensure that the estimated value of the property matches the contract price. This is extremely important to lenders because the property represents the “collateral for your home loan,” and lenders must ensure that there is a sufficient “capital buffer” to keep the mortgage within acceptable risk parameters. 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 When Preparing for Your Home Appraisal. Homeowners considering putting their home on the market can have a pre-listing assessment done to get a better idea of the market value of the home.
Unless you plan to pay everything in cash for your new property, you'll likely need a California home appraisal. And if you know just a little bit about the process, you know that an appraisal of a value placed on your home by an objective outside expert can make or break the sale of your home. Unfortunately, if your surrounding area has experienced recent distressed sales, that can lower the appraised value of your home. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser must have the required license or certification in all 50 states and be familiar with the local area.
When appraisers submit their appraisal reports for a compliant or FHA loan, the reports are automatically uploaded to Fannie Mae and Freddie Mac systems. When all goes well, the home appraisal is just another box to check on a closing checklist. If you are using a home loan to finance your purchase, the lender will likely request an appraisal of the home before issuing the loan. The amount of time the entire process takes depends on the complexity of the assessment and the evaluator's workload or schedule.
Keep in mind that you are unlikely to recover the full cost of a major renovation, such as a kitchen or bathroom remodel, on the assessed value of your home. During the actual inspection, an appraiser analyzes a number of factors in the home to determine its value. While you can't change the location of the property, you can do something about other factors that could lower the home appraisal. When refinancing a mortgage, if the appraised value places the equity in your home at less than 20%, you will have to pay private mortgage insurance (PMI).
Buyers can also expect to pay a higher appraisal fee in a very rural area simply because there are fewer appraisers working in these areas. When you buy a home and it's under contract, the appraisal will be one of the first steps in the closing process. .