Home appraisals are important and generally are part of the buying/selling process. I get asked a lot of questions about home appraisals and my clients often get nervous awaiting the appraisal report.
What is an appraisal?
It’s an expert assessment of the value of something – for real estate, it’s your home. Appraisals come in the form of a report by a licensed appraiser; anything else is just a price opinion. Lenders most likely require appraisals to assure the value of the home is not less than what they are lending, but sometimes these can be waived.
Appraisals can be used for purchasing, refinancing, estate planning, estate settlement, and tax assessment.
For what reasons can an appraisal be waived?
This is up to the lender. Generally, lenders like to have an appraisal done on a home you are purchasing. However, while refinancing your home, you may not be required to have an appraisal. It really depends on the lender’s requirements.
How much does an appraisal cost?
Here in Northern Nevada, an appraisal generally costs around $500, sometimes more. If you have an exceptionally larger home, it may take longer to appraise and cost a little more. Or if the home is in a rural/remote location there may be extra costs for drive time and mileage.
Who pays for the appraisals?
In a real estate transaction, the buyer pays for the appraisal, but sometimes it can be negotiated to be paid for by or split with the seller, usually paid as a reimbursement at closing.
How does an appraisal work?
An appraisal is the due diligence of the buyer and lender and tells the buyers the value of the home, and how much you will spend on the home. Once an offer is accepted by the seller, the contract then begins, the lender will order an appraisal of the home, and the buyer’s agent will schedule for any inspections.
What is a home appraiser looking for?
An appraiser verifies measurements and home specs, such as basements and attics, indoor and outdoor features, and additional buildings. An appraiser looks for upgrades and compares to comparable homes, establishes how your home stacks up with comparable sales in the neighborhood, checks the debits and credits back and forth between the comparable sales until they arrive at a final value.
How to prepare for a home appraisal?
Sellers should clean before the appraisal like you would for a showing. Don’t take on any major projects that won’t get completed before the appraiser arrives. Make any repairs to maintenance items such as light switch plates, fixtures, broken or damaged windows, missing electrical plates or leaking faucets, and tend to any home safety and health issues. These minor things don’t necessarily count against the home value but it can give the overall impression the home has not been maintained. Have a list of any repairs, updates or renovations that have been made – new roof, windows, upgraded HVAC, finished basement, kitchen remodel, flooring or carpet upgrade/replacement, bath remodels. These things can add value to your home.
An Appraisal came in lower than purchase price…now what?
By far, everyone’s biggest fear.
This doesn’t happen often but if it does, look for errors (use your agent to help), comb through the appraisal report, and make sure all looks good. Check the comparable sales. If they make sense, again, lean on your agent to help as they have access to MLS and the data appraisers use for comparables. Request another appraiser and get a second opinion if things look wrong, not just less than you hoped.
Renegotiate the contract, the appraisal is the reason expert pricing is important in the beginning of a real estate transaction. If you have your house priced too high, you might be looking at an appraisal that contradicts your pricing opinion. This is a great reason to trust that your agent is accurately pricing your home and not feeling pressed to list it higher because you think it should be worth more than the market can bear.
Appraisals are a common step of the process. An appraisal doesn’t have to be scary and it should be pretty easy to navigate. However, if problems arise, your agent can help!!