When you buy a home and there is going to be a mortgage taken out on it, your lender will require that there be an appraisal of the home to verify its value. This is to make sure that the lender is covered for their vested interest and that you aren’t overpaying for something that is not worth it.
What is the appraisal?
The home appraisal is done by a licensed appraiser to establish the current value of the property. The appraisal is done by a personal visit and inspection of the home combined by an analysis of the data of recent sales of similar homes in the area.
Inspection v. appraisal
While both of these are crucial for the home buying process, they serve different purposes. An inspection is a thorough review of the home, its structure and systems. This is important for the purchaser, insurer, and mortgage company to all be aware of with regards to the physical condition of the home and what may be needed for repairs. The appraisal, while takes much of this into consideration, is primarily done to assess fair market value.
What do they cost?
Generally speaking, appraisals are typically done around the $300 to $400 range. Although the mortgage lender orders the appraisal to be done, it is customary for the buyer to be paying for it as part of the closing costs.
What is the process?
Once your offer is accepted on your new home and you have signed the contract, that is when your lender will order the appraisal on the home as part of the next steps. Generally you do not attend the appraisal appointment like you would with a home inspection as it is not necessary, but it is possible if you ask.
What do they look for?
There are many things that are looked at when the appraiser conducts a report of value. Here is an idea of the things they will examine:
-Recent sales of similar properties nearby
-Lot and home size
-Age of the home
-Condition of the home
-Amenities, such as carport, pool, etc
-Local housing trends
As you are the one purchasing the home, you are entitled to a copy of the report at least three days before the loan closes. Be sure to review it for accuracy. Should the value come back lower than you expected, you may be able to renegotiate the purchase price.