Finding your perfect home is an exciting step in the home-buying journey, but it’s just one part of the overall process. After you’ve signed a sales contract and are ready to move forward with your purchase, several key steps need to happen before you can officially call that home your own. One of those crucial steps is the home appraisal.
Most home buyers use a mortgage to finance their home purchase. Lenders, such as banks or credit unions, require assurance that the home is worth the purchase price before they agree to loan the money. This is where the home appraisal comes into play—a third-party assessment determining the home’s value. Let’s explore what a home appraisal is, who conducts it, and what factors can influence the final valuation.
What Is a Home Appraisal?
A home appraisal independently evaluates the property’s current market value. The appraisal is conducted by a licensed appraiser who assesses the home’s condition, features, and comparable home sales in the area. This ensures that the lender isn’t loaning more money than the home is worth, protecting both the buyer and the lender from overpaying.
The cost of a home appraisal typically ranges between $300 and $600, depending on the size of the home, whether it’s a single- or multi-family property, and the complexity of the land it sits on. In most cases, the buyer pays for the appraisal, although this cost can sometimes be negotiated with the seller as part of the purchase agreement.
Who Conducts a Home Appraisal?
A home appraisal must be conducted by a licensed, third-party appraiser who operates independently of the buyer and the lender. Although the lender may recommend reputable appraisers, it’s essential that the appraiser remain impartial throughout the process. This independence ensures an unbiased assessment of the property’s value based solely on the home’s condition and market factors.
This separation is crucial because it prevents conflicts of interest. Neither the real estate agent nor the buyer or seller can influence the appraiser’s final decision, which adds credibility to the valuation process.
Factors That Impact a Home Appraisal
Several key factors go into determining the appraised value of a home. The appraiser evaluates the home’s physical condition, features, and the broader real estate market in your area. Understanding these factors can help you anticipate the appraisal outcome and possibly take steps to improve it.
1. The Home’s Condition
The condition of the home plays a significant role in its appraised value. The appraiser will conduct a thorough inspection of the property, assessing its size, layout, and overall livability. Unlike a home inspection, which looks for specific repairs or damages, the appraisal focuses on how the home meets local code requirements and whether it’s in safe and habitable condition.
For instance, the appraiser will check for essential features like the number of bedrooms and bathrooms, necessary safety elements such as egress points (windows and doors that provide escape routes in case of emergency), and whether the home meets fire and building codes. Hazardous conditions, such as lead paint in older homes, may also negatively impact the appraised value.
2. Special Features and Upgrades
Certain upgrades and special features can increase the home’s value. High-end materials like granite countertops, custom cabinetry, or luxury flooring can raise the appraised value, especially if these upgrades are permanent fixtures. Other valuable features, like an in-law suite, a swimming pool, or energy-efficient systems, may also add to the home’s worth.
However, it’s important to note that not all improvements will necessarily increase the appraised value. For an upgrade to be considered in the appraisal, it must be permanently installed and add long-term value to the property.
3. Comparable Homes in the Area
One of the most influential factors in a home appraisal is the price of comparable homes—often called “comps”—in your neighborhood. These recently sold properties are similar in size, layout, and features to your home. The appraiser will analyze the sale prices of these homes to determine how much your home is worth in the current market.
Unfortunately, this is one factor you have little control over. If a home similar to yours sold for a lower price recently, it could decrease your home’s appraised value, even if your property is in better condition. Conversely, if comparable home prices are rising in your area, your appraisal amount can increase.
Can You Appeal a Home Appraisal?
If you disagree with the appraised value of your home, you do have the option to appeal the decision. This process typically involves presenting evidence that the appraiser overlooked or undervalued certain aspects of your home, such as upgrades or recent sales of comparable properties that may not have been included in the initial report.
While appraisals are generally final, appealing can be worthwhile if you believe there was a mistake or oversight. You’ll need to provide strong evidence, such as additional comparable home sales or documentation of significant improvements, to support your case.
How to Prepare for a Home Appraisal
Although there are some aspects of the appraisal you can’t control—such as market conditions or comparable home prices—there are steps you can take to ensure your home makes the best possible impression.
- Maintain the Home: Maintain the home with regular maintenance and repairs. A well-maintained home is more likely to receive a higher valuation.
- Present Your Home Well: Ensure your home is clean and presentable for the appraiser’s visit. First impressions matter; a tidy house can reflect positively on its overall condition.
- Be Realistic: Understand your home’s value realistically before the appraisal. Knowing the market and how appraisers work can help set appropriate expectations.
Conclusion
A home appraisal is a crucial step in home-buying, providing an independent, third-party assessment of a property’s value. By understanding how appraisals work and what factors influence the valuation, you can better prepare for the process. From keeping your home in good condition to having realistic expectations about comparable home sales, these steps will help ensure you get the best possible appraisal outcome. Whether you’re a first-time buyer or a seasoned homeowner, understanding appraisals is essential for successfully navigating the real estate process.
FAQs
How to do a home inspection checklist?
Check the structure, roof, plumbing, electrical systems, HVAC, foundation, windows, doors, and overall safety features like smoke detectors and handrails.
How to do a home inspection yourself checklist?
Inspect the roof for damage, test all electrical outlets and switches, check for plumbing leaks, ensure HVAC functions properly, and examine the foundation for cracks.
How to pass home inspection checklist?
Ensure major systems like plumbing, electrical, and HVAC are in working order, fix minor repairs like leaky faucets, and remove safety hazards like loose railings.
What do they check during a home appraisal?
During an appraisal, they assess the home’s condition, size, location, comparable property values, and features such as the number of bedrooms, bathrooms, and overall property quality.