A home appraisal is an integral part of a real estate transaction. Whether you’re getting a mortgage to buy a home, refinancing your current mortgage or selling your house, home appraisal is a checkbox that will have to be ticked off.
What is a Home Appraisal?
A home appraisal is the fair valuation of a house. It is a process by which a licensed real estate appraiser ascertains how much a home is worth.
A certified state-licensed professional appraiser is going to evaluate your home and give its total worth. Usually, this is objectively evaluated through different factors. 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 home appraisal costs anywhere between $313 to $421, with the average cost of home appraisal for single-family homes being $352. The cost of a home appraisal depends on various factors. The size of the property, the location, and the condition of the house may affect the home appraisal fees charged by the professional. 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?
The home buyer pays for the home valuation in case of a purchase transaction involving a mortgage. The lender will order the home estimation to determine the fair market value of the house. The home appraisal report assured the lender that value of the house is more than the mortgage amount being borrowed by the buyer.
For a refinance transaction, the home owner will be responsible for paying the cost of home valuation. Home owners 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.
A home buyer making an all cash offer should also order a home estimation to ensure that they are not offering more money than what the house is actually 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 home owner 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 exterior of the house. For a hybrid appraisal, they will assess the interiors of the house as well. They will assess the property based on the size, location, age, condition. The 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 home owner 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 assessment of the house, 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).
How Long Does Home Appraisal Take?
In a house 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 location of the property and the availability of appraisers in the region.
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—and so 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 can decrease the value of your home. As much as possible, repair what is to be repaired even how slight it can be.
Apply the $500 rule seriously and think of it as a good tactic to increase the value of your home. 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 appraisal having lots of repairs to be done.
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