As a buyer if you are using a loan to buy a home, your lender will want an appraisal to be part of the process. If you are paying cash you may also want an appraisal just to be sure what the home is worth so you know if you have offered too much for the home.
As a seller you will want an appraisal to make sure you are getting what your home is worth, and so you don’t overprice it when trying to sell. A professional appraiser creates an estimated value based on recent properties that have sold in the area that are similar to your home.
The appraiser will take into consideration the size of your home, when it was built, the condition it is in, the amenities that are included, and compare them to the homes that have sold. They will make adjustments either up or down based on each comparison. For instance if your home has 5 bedrooms while the house that sold had 4, an amount will be added to the value of the home that sold to make it comparable to your home, say $10,000. This amount will depend on your market area.
Home Appraisal Process
The home appraisal process will include a complete walk through of the house to count rooms and amenities. The condition of the home will be documented both inside and outside. Information will be confirmed on the square footage, whether there is a garage, basement and whether it is finished, fireplaces, pools, and materials used in the home such as granite countertops.
The appraiser then uses math formulas to compare your homes features to those that sold. Other appraisal systems can be taken into account as well such as what is would cost to build the home now.
Home Appraiser Credentials
Home appraisers has to be state certified in home appraisal processes from an accredited school. Today, most banks work with specific appraisers or send assignments to a company that chooses the appraiser to be assigned from a pool of appraisers they work with in that location. This may mean that you cannot choose your appraiser unless you are a cash buyer.
Appraisers are Not Inspectors
The home appraisal process is not an inspection. The appraiser is not certified to tell you if there are structural problems, termites, mold or other issues with the home. A home inspection should still be schedule to determine if the home is in good shape from those perspectives.
If you are a buyer you will want to make sure the home appraises for what you are paying for it so that when it comes time to sell you can hopefully recoup your investment. As a seller you need to be aware of your homes appraisal value when setting a sales price when it is time to sell. We often advise sellers to get an appraisal before putting their home on the market so that there are no surprises when an offer is made and an appraisal is ordered. If an appraisal comes in under the sales price agreed to. Negotiating often starts again as the bank will not fund loans for over the appraisal amount.