There are many steps involved when purchasing a home. The experience can be especially confusing if you’ve never gone through it before. One of the first to-dos on your list should be to get a home appraisal.
Yes, it’s important to get a home appraisal, since it tells you the value of the property you're considering purchasing.
The following is a helpful explainer about home appraisals, including useful breakdowns on how they work, how to prepare for one, associated costs, and more. Let's begin with those who conduct these valuations, and why home appraisals are so significant:
Real estate appraisers and assessors “provide a value estimate on land and buildings,” states the U.S. Department of Labor's Bureau of Labor Statistics.
The government-sponsored enterprise Federal National Mortgage Association (Fannie Mae) also stresses the importance of home appraisals via its website, stating its lender partners “rely on appraisers to provide them with thorough, accurate, and objective appraisal reports that result in reliable opinions of market value so they can make prudent underwriting decisions.”
“The appraisal is used to judge the property’s acceptability for the mortgage loan requested in view of its value and marketability,” it continues.
As a result, whether you’re buying a home or refinancing your current one, the home appraisal is a key part of the process.
If a property does not appraise at the expected amount, the lender likely won’t provide the buyer the loan, as the home’s worth doesn’t match the price. Consequently, the buyer could choose not to move forward with the purchase if there was an appraisal contingency clause in the contract. On the other hand, he or she could find a way to pay the difference between the amount the home appraised for and the price, if set on purchasing the property. The seller could also lower the price, or try to prove the property is worth the higher value.
Such a situation also highlights why it’s essential to work with real estate professionals, including lenders, real estate agents, and lawyers to help smooth these bumps in the road.
The seller or homeowner can prepare for a home appraisal in several ways. Forbes magazine offers some tips for a higher home appraisal:
"Give the home’s exterior some attention. Appraisers factor in curb appeal."
Finally address the small repairs you’ve been putting off.
“For appraisers, the condition of a home often matters more than the year it was built,” states the aforementioned article.
Another piece of advice is to give the home’s exterior some attention. Appraisers factor in curb appeal. Plus, it’s the first thing people notice when they look at the property, and great aesthetics could certainly help increase its value.
Creating “a file of all recent improvements, upgrades, and tax documents,” could be helpful, too, advises the Forbes piece. “It’s also a good idea to take before-and-after photographs of any improvements and upgrades.”
“Also be sure to include documentation for any permits that were pulled as part of home improvement projects,” it continues.
A home appraisal cost can vary. Home services digital marketplace HomeAdvisor shares: “Based on our survey of more than 3,400 HomeAdvisor members, the national average cost of a professional appraisal is about $335. Most people pay between $311 and $404, although some will pay as little as $250 or more than $450 for an appraiser to spend a few hours on their property.”
No matter what phase of the home-buying process, it's always helpful to consult with trusted mortgage professionals, such as the incredible team at Contour Mortgage. Contact us, today.