A home appraisal is an integral part of any real estate transaction. Whether you’re getting a mortgage to buy a home, refinancing your current mortgage or selling your house, this is a checkbox that will have to be ticked off.
Beyond being a mere formality, the appraisal serves as a safeguard for both lenders and homeowners. It not only ensures the valuation is close to accurate but also validates the investment made by everyone involved.
What is a Home Appraisal?
A home appraisal is the fair valuation of a house. In a home appraisal process, a licensed real estate appraiser ascertains how much the home is worth.
A certified state-licensed professional appraiser is going to evaluate your home using different factors and give its total worth. The home-selling transaction can also be canceled or delayed when the appraisal value is lower than the expected value.
How Much Does a Home Appraisal Cost?
According to HomeAdvisor, a professional home appraisal costs between $313 to $421, with the national average for a single-family home sitting at $352.
Several variable factors influence these fees, including the property’s size, location, and overall condition. For example, the fees for home valuation may be higher in certain metro regions and in some rural areas. Similarly, the appraisal cost for a multi-family unit might range between $600 to $1,500.
Who Pays for Home Appraisal?
In a standard transaction involving a mortgage, while the lender orders the home appraisal, it is the home buyer who covers the fee. The home appraisal assures the lender that the house’s value is more than the mortgage amount being borrowed.
For a refinance transaction, the homeowner will be responsible for paying the cost of home valuation. Homeowners opting for refinance are either looking to lower their loan interest rate or switching to a fixed interest rate model.
In either case, the lender will need proof of how much the home is worth before signing off on the revised loan terms. Meanwhile, a homebuyer making an all-cash offer should also order a home estimation to ensure they are not offering more money than what the house is worth.
How Do Home Appraisals Work?
The typical home valuation process for a real estate transaction is as follows:
Scheduling the Appraisal
The lender orders the home valuation through a third neutral party as soon as the buyer applies for the mortgage or a homeowner applies for refinance.
The lender may appoint an appraiser from an Appraisal Management Company or a local individual appraiser. Based on the type of appraisal required, the house appraiser will contact the owner to schedule a date and time for the visit.
Visiting the Property
In the case of a drive-by appraisal, the appraiser will visit the property to assess the exterior of the house.
For a hybrid appraisal, they will also look at the interiors, assessing the property based on the size, location, age, condition. They will measure the square footage of the house and check out the improvements and renovations made to the property. They will even look at the structural construction and curb appeal.
The homeowner can accompany the home appraiser and highlight the features of their house that they have recently upgraded. A house owner need not be present during a drive-by appraisal.
Preparing the Report
After the house’s assessment, the appraiser will draw the appraisal report. The report will include the appraiser’s findings during the assessment and data of recent sales of similar properties in the neighborhood, known as comparables (comps).
» Home Appraisal Checklist: Check out our comprehensive home appraisal checklist to see what experts look for during the home appraisal process.
How Long Does Home Appraisal Take?
In a home buying transaction, the lender orders the appraisal after the buyer makes an offer and signs the purchase agreement.
For a mortgage refinance, a house appraisal is ordered as soon as the refinance application is made. Depending on the type and complexity of the appraisal, the physical walkthrough will take at least a couple of hours.
It may take around 7-10 days for the appraiser to draw the final appraisal report after conducting proper market research. The time it may take for the appraisal report to be finalized also depends on the property’s location and the appraisers’ availability in the region.
👉How Long Does an Appraisal Take? – Read our blog to get a detailed timeline on the appraisal process!
Apply the $500 Rule
Have you ever heard of the $500 rule? It’s a useful idea that suggests every house issue can add up when it is multiplied by $500. That’s why it’s crucial to perform minor repairs rather than ignoring them.
Minor issues like faulty light switches, defective doorknobs, and such can affect the whole worth of your home. Don’t let a simple issue decrease the value of your home. As much as possible, repair what can be repaired, no matter how small the issue could be.
Apply the $500 rule seriously and think of it as a good tactic to increase the home’s value. Spending an amount of $500 or less to do some repairs and fixes can save you more than you imagined. Don’t risk showing your home to the appraiser while having lots of repairs to be done.
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