The home appraisal process
Appraisals are conducted by highly-trained professionals who are licensed and/or certified to determine the value of a home fairly, objectively and without bias in the state where the property is located. While no appraiser is infallible, his or her opinion of the value of your home is informed by rigorous training, numerous tests, several years of on-the-job experience and required continuing . Get the Best Mortgage Rate for You Inspection. One major part of an appraisal is a physical home inspection. The appraiser takes measurements and makes Other Factors. Following an appraiser's inspection, the appraisal moves on to the research phase. This involves Similar Processes. Several.
The purpose of an appraisal is to determine the fair market value of a home. In the refinance process, it happens between loan processing and final approval. Appraisers are licensed or certified professionals who provide a qualified opinion of value. All states require appraisers to be licensed or certified to provide appraisals to federally regulated lenders. Appraisers are considered third-party participants in the transaction. Yet, it also assures that you as the home buyer or homeowner are receiving a fair, unbiased price for your property.
The three comps must be sales that have closed within six months of your appraisal date to be considered accurate. Expect your assigned appraiser to use the designated forms written and approved by the FHA, Fannie Mae, etc. These forms ask specific questions about neighborhood demographics, housing trends, utilities, home measurements, site characteristics, property condition, general improvements, and at least one approach to value.
More specifically, you can expect the following factors to be reviewed:. The condition of the home are there any cracks, damages, leaks, etc. The finishing details in the home such as granite countertops, hardwood floors, and appliances.
Tip: A home appraisal is not the same as a home inspection. Learn about the differences and the importance of home inspections. Home buyers or borrowers looking to refinance: you can download old version of whatsapp for iphone 3g an appraiser to be at your home from 20 minutes to two hours, depending on the size of the property. Once the physical appraisal is complete, the appraiser creates a written report of findings for the mortgage lender.
This generally takes three to five days. The appraiser must confirm all data, so this takes some time. Maximize your home value ahead of time, so your home appraises as high as it can.
This may include significant work such as home renovationsor simple tasks like the ones listed in the checklists below:. Include an appraisal contingency so your offer can be withdrawn if the appraisal comes up short.
Repairing damaged drywall or painting rooms can factor into your valuation. Document recent home improvements with estimated prices and dates. Even the smallest of changes can contribute to the overall condition of your property. Want a better understanding of home value? Read our guide on appraised value vs. Home appraisals vary based on the type of financing used when purchasing the home.
So your appraiser will look for:. The lot to be positioned so drainage moves away from the house, not toward it.
A roof that keeps moisture from entering the home a roof that needs to be replaced within 2 years must be reported. Defective paint on properties built after chipping, peeling or flaking paint. Evidence of termites though termite testing is not required by the FHA. For a complete checklist of these and how to get in shape in 3 weeks appraisal requirements, refer to HUD Handbook Though similar to the conventional loan appraisal process, there are a few differences when it comes to the government-backed VA home loan.
The VA will assign the appraiser your lender does not select the appraiser. If the lender does not have an SAR, the appraisal must be sent directly to the VA for review before the loan can move forward. The purpose of the review is to ensure the value is fair and the property meets lender and VA guidelines.
Once the lender receives the appraisal report, the Staff Appraisal Reviewer is generally expected to issue the Notice of Value NOV within five how is spectrometry used to determine the composition of stars days.
The NOV provides finale home value and also records any necessary repairs. These repairs will need to be completed before the loan can close. Sometimes they are minor repairs that will bring the home up to VA guidelines.
Other times it is something as simple as a termite inspection that was not yet completed. Usually, the home buyer pays for the appraisal or the homeowner in the case of a mortgage refinance. Just ask the seller to match the appraisal price. If the home was overpriced or the value was inflated, this is often the best solution. This can be troublesome for your mortgage refinance because a low appraisal can mean a higher loan to value LTVwhich can affect your interest rate. You may be able to dispute the appraisal.
After all, it is a subjective figure meaning it could have been incorrectly calculated. Instead, you can work with your lender to present facts that may have been overlooked or omitted by the original home appraisal. Many purchase contracts contain a loan contingency if the appraisal comes in low. A properly written loan contingency allows the buyer to cancel the contract and requires the seller to release the buyer's earnest money deposit.
At the end of the day, the most important point is that you have the ability to help increase appraisal results by maximizing your home value.
Mortgage Basics Search. What is an appraiser? What does a home appraiser look for? More specifically, you can expect the following factors to be reviewed: The condition of the home are there any cracks, damages, leaks, etc.
How long does an appraisal take? How to prepare Maximize your home value ahead of time, so your home appraises as high as it can. VA appraisals: Notice of Value NOV Though similar to the conventional loan appraisal process, there are a few differences when it comes to the government-backed VA home loan.
What does an appraisal cost and who pays for it? AFC Recommends.
Appraisal checklist for selling or refinancing a home Ensure your landscaping is on point as “curb appeal” is considered during an appraisal Repairing damaged drywall or painting rooms can factor into your valuation Make sure every light switch, wall outlet, fan or vent works Document recent home. The appraiser considers factors including: The condition of the home The size of the home The size of the property lot The quality of landscaping The number of bedrooms, bathrooms, and rooms The quality of light and views The number of fireplaces The addition of a swimming pool The quality of the.
Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. An appraisal is an unbiased professional opinion of a home's value. Appraisals are almost always used in purchase-and-sale transactions and commonly used in refinance transactions.
In a purchase-and-sale transaction, an appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location, and features. In a refinance transaction, an appraisal assures the lender that it isn't handing the borrower more money than the home is worth. Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take.
Lenders want to make sure that homeowners are not over-borrowing for a property because the home serves as collateral for the mortgage. If the borrower should default on the mortgage and go into foreclosure, the lender will sell the home to recoup the money it lent.
The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario. Because the appraisal primarily protects the lender's interests, the lender will usually order the appraisal. An appraisal costs several hundred dollars and, generally, the borrower pays this fee. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified—as required in all 50 states—and be familiar with the local area.
Per federal regulations, the appraiser must be impartial and have no direct or indirect interest in the transaction. A property's appraisal value is influenced by recent sales of similar properties and by current market trends.
The home's amenities, the number of bedrooms and bathrooms, floor plan functionality, and square footage are also key factors in assessing the home's value.
The appraiser must do a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property's value, such as needed repairs. The report asks the appraiser to describe the interior and exterior of the property, the neighborhood, and nearby comparable sales.
The appraiser then provides an analysis and conclusions about the property's value based on their observations. The report must include:. If the appraisal comes in at or above the contract price, the transaction proceeds as planned. If the appraisal comes in below the contract price, however, it can delay or derail the transaction. Chances are, neither you nor the seller wants the transaction to fall through. As the buyer, you have an advantage, in that a low appraisal can serve as a negotiating tool to convince the seller to lower the price.
The bank won't lend you or any other prospective buyer more than the home is worth. While appraisals help buyers avoid overpaying for homes, a seller may feel that a low appraisal is inaccurate and be reluctant to drop the price. If a bad appraisal is standing between you and your home purchase or sale, look into getting a second opinion via another appraisal by a different person.
Appraisers can make mistakes or have imperfect information. Better yet, present a factual case for a higher value to the original appraiser. They may agree with you and revise the evaluation. Federal guidelines intended to eliminate the inflated appraisal values that contributed to the housing crisis sometimes cause appraisals to come in below fair market value and can make low appraisals difficult to challenge.
Holding out for an all-cash buyer who doesn't require an appraisal as a condition of completing the transaction is unlikely to net you a higher sales price. No one wants to overpay for a home. Unfortunately, if your surrounding area has experienced recent distressed sales , that can lower your home's appraisal value.
Getting an appraisal is also a required step when giving a home to a family member as a gift of equity. If you're refinancing a conventional mortgage , a low appraisal can prevent you from doing so. The home needs to appraise at or above the amount you want to refinance for your loan to be approved. However, if your existing mortgage is an FHA mortgage , you can refinance without an appraisal through the FHA Streamline program—a great option for underwater homeowners.
When everything goes smoothly, the home appraisal is just another box to check on a closing checklist. When the appraisal value is lower than expected, the transaction can be delayed or even canceled. Regardless of which situation you encounter in your home buying, selling, or refinancing experience, a basic understanding of how the appraisal process functions can only work in your favor, especially if you're buying your first home. Appraisal Institute. Accessed Mar. Fannie Mae. Consumer Financial Protection Bureau.
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Personal Finance. Your Practice. Popular Courses. Part Of. Getting Started. Finding Your Home. Protect Yourself. Mortgage Basics. The Buying Process. Home Ownership Purchasing A Home. Table of Contents Expand. What Is a Home Appraisal? The Appraisal Process. What Homebuyers Need to Know. What Home Sellers Need to Know. Advice for Refinancing Homeowners. The Bottom Line. Key Takeaways An appraisal is an unbiased professional opinion of the value of a home and is used whenever a mortgage is involved in the buying, refinancing, or selling of that property.
A qualified appraiser creates a report based on a visual inspection, using recent sales of similar properties, current market trends, and aspects of the home e. The borrower usually pays the appraisal fee, which can be several hundred dollars. Article Sources. Investopedia requires writers to use primary sources to support their work.
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