What is a home appraisal?
A home appraisal evaluates the market value of a home. Mortgage lenders will typically bring in a licensed appraiser to assess a property and make sure you're not offering more for the property than it's worth. This helps them ensure that you, the buyer, are not over-borrowing. This valuation process is usually conducted by an unbiased third-party appraiser.
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What is considered a home appraisal?
The appraiser's report will evaluate several things about the property, including:
Size, layout, and any unique or desirable amenities
Number of bedrooms and bathrooms
Floor plan
Recent sales data for similar properties in the area
The home appraisal process is a complete visual inspection of the house and will note any visible issues that may detract from its overall value. The appraisal report will include a visual sketch of the home's exterior, a map indicating the exact location of the property, photographs of both the interior and exterior and any land records that may influence the home's value.
How is an appraisal different from a home inspection?
While appraisals and inspections are detailed examinations of the property, each serves a different purpose. A home inspection is a thorough search for issues with the property that will require repairs. An inspector might test the home's electrical connections, heating system, water potability, roof quality, or anything else that might impact your ability to safely inhabit the house.
An appraisal primarily evaluates the property's visual qualities. The home appraisal process is less intensive and focuses on the home's design, overall quality, and any perceivable flaws that may impact the value.
Can an appraisal impact the closing process?
In short, yes. If the appraisal report indicates that the offered amount is less than or equivalent to the home's value, the sale can proceed as scheduled. However, if the appraised value is lower than the borrower's offer, this can delay closing. Lenders want to avoid lending more than a property is worth, so the borrower may have to amend their offer based on the appraisal results.
Learn more about how to prepare for the home closing process.
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Should I get an appraisal before buying a house?
Appraisals are not always required to purchase a home. Residential properties costing less than $400,000 do not need to be appraised unless the lender is a government agency.
However, even if they aren't always required, appraisals can be helpful in a few ways. An appraisal prevents you from paying more for the property than it's worth. Additionally, the appraisal report may point out areas of concern that negatively impact the home's value. As a result, you'll know what you should be prioritizing if you decide to renovate. Appraisals can also be useful even if you already own the house and may help you determine a fair asking price if you're planning to sell.
Who pays for the appraisal?
Unless specifically requested in the offer terms, the buyer is generally responsible for appraisal fees. Learn more about closing costs when buying a home.
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