How Home Appraisals Work
If a home appraisal is on your mind, chances are you are in the midst of refinancing, buying, or selling a home. Having a home appraised means that you are trying to find out how much a home is worth, or how much it would sell for under normal market conditions.
Appraisals are written to be understood by those familiar with them, so don’t be concerned if you do not fully understand the paperwork that is handed to you. Appraisals are not an exact science either and they can sometimes become a confusing part of the home loan or refinance process. The appraisal is a crucial piece of the home buying or refinancing process and it is very important to hire a reputable home appraiser that you can trust. The independent home appraisal company you choose will determine the value of the property you are looking to buy or sell, affecting the amount your mortgage lender is willing to loan you for a refinance or to purchase.
Typically, a home appraiser will be looking at factors like the number and types of rooms, square footage, the general condition of your home and property, and listed amenities – basically confirming the house is as the records say it is. Don’t be alarmed if they only spend a short amount of time actually looking at your home – a lot of what your home appraiser does involves researching other homes in your area. They take the information gathered about your home, and compare it to similar homes that have recently sold in your area to help set the appraisal value.
If you are buying a home and an appraisal comes in well below the purchase price you’ve already agreed upon, you may have trouble getting a home loan for the amount you want. To avoid this, ask your realtor for a Comparative Market Analysis, or “comps”, to see how the value of similar homes in the area before you settle on a price. This will help ensure the appraisal won’t come in drastically lower (or higher) than the purchase price you’ve agreed upon, and that you are paying a fair market value for the home you’re looking to purchase.
If an appraisal comes back considerably lower than what you expected, there are some options you should consider. If your mortgage lender won’t approve a loan for the fully agreed-upon purchase price, you might consider putting down a larger down payment to make up the difference. You may also be able to renegotiate the purchase price with the seller. If you think there are mistakes or comparable properties that were not included in the appraisal, you can ask the appraiser to reconsider the additional information, though this is only rarely done.
At New America Financial, it is important that our clients fully understand the home buying and refinance process. We have partnered with a trusted and independent appraisal company and our appraisals are completed in 24-48 hours of contract ratification. Do you still have a question about the appraisal process? Let us know!