As a homeowner, you may be asked to get a home appraisal for a variety of reasons. Maybe you’re refinancing your mortgage, or perhaps you’re selling your home. As a home seller, you will need to go through the process of home appraisal to secure a mortgage. In any case, an accurate appraisal is critical to the process.
A home appraisal typically involves an inspector coming to the home to assess the property value. The appraiser will look at things like the size of your home, the condition of your home, recent sales of similar homes in the area, and any upgrades or renovations you may have made. After the inspection, the appraiser will give you a report that details their findings.
There are a few reasons why you may need a home appraisal.
If you’re selling your home, the buyer’s lender will require an appraisal to ensure that they’re not lending more money than the home is worth. But, in this situation, you actually aren’t involved. The buyer’s lender purchases the appraisal with the buyer’s money. You actually aren’t even entitled to know the results.
While the buyer can’t lie to you, they may only tell you that it met appraisal, was over appraisal, was under appraisal, or nothing at all (if it doesn’t impact the transaction). So, you may want to get your own appraisal in advance for more bargaining power.
If you’re refinancing your mortgage, your lender may also require an appraisal to determine how much equity you have in your home. You may also need an appraisal if you’re taking out a home equity loan or line of credit. In this case, the lender wants to know how much your home is worth so they can lend you a percentage of that value.
If you’re purchasing a home, you will need to order an appraisal through your mortgage lender, to ensure that you aren’t purchasing a home for way more than it’s actually worth. This is where it can be a challenge, because if the home appraises “low,” then you frequently need to make up the difference. A bank won’t lend a $200,000 mortgage on a $150,000 home; you would have to make up that $50,000, renegotiate with the buyer, or walk away from the transaction.
If you’re selling your home, the buyer’s lender will order the appraisal. However, if you’re refinancing your mortgage, you may be able to choose your own appraiser. It’s important to select an experienced and reputable appraiser to ensure an accurate assessment.
The appraisal process typically takes a few days. The appraiser will visit your home and assess the property value. They will also look at comparables within the market. But an appraiser isn’t always perfect and there can be some mistakes.
Some obvious mistakes, like square footage, can be fixed with ease. But if the mistake is more subjective (such as whether a kitchen is “updated”), you’re very unlikely to get the appraisal changed. Instead, you may need to get another appraisal entirely.
It’s important to remember that an appraiser is looking at your home from a business perspective. They aren’t considering the sentimental value or how much you’ve invested in renovations. An appraiser is simply trying to assess what a buyer would be willing to pay for your home on the open market.
If you’re selling your home and the appraisal comes in lower than the agreed-upon purchase price, you have a few options. You can try to negotiate with the buyer to make up the difference. If they’re not willing to do that, you can walk away from the deal entirely.
If you’re refinancing your mortgage and the appraisal comes in lower than the value of your home, you may still be able to refinance. However, you may end up with a higher interest rate or have to pay for private mortgage insurance (PMI).
It’s important to remember that an appraisal is just one person’s opinion on the value of your home. It’s not set in stone. If you don’t agree with the appraised value, you can always get a second opinion. It’s often easier to get a second opinion than try to change the initial appraiser’s mind.
A home appraisal is an important part of the home buying and selling process. Because most people only get an appraisal on a property once or twice in their lives, it can be a somewhat mystical process. What you need to know is that appraisals are done extremely rigorously through standardized rubrics. Although there is some room for subjectivity (in very hot markets), they will usually be accurate.
But that doesn’t mean that they’ll be what you expect. Because markets shift so frequently, you may find yourself with a home value much higher or lower than what you expected. Don’t rely on the appraisal to come out exactly how you want it to—and get your appraisal as early in the process as you can so you can adjust if needed.