When selling or buying a home, the topic of whether or not a home appraisal should be completed is bound to come up at some point or another. A home or residential property appraisal helps establish a home’s market value, or the likely sales price that the property would fetch if offered in a competitive real estate market. There is value in arranging for a home appraisal as both the buyer and seller – understanding the home’s value can tremendously influence the selling price one way or another. But what is a home appraisal, exactly?
In this article, 180 Homes explores what a home appraisal is and how much it costs, who you would hire to get your house appraised, and some of the benefits home appraisals provide for both buyers and sellers. With 180 Home’s helpful guide, you can approach your home appraisal like a real estate professional and properly anticipate what their results mean for your real estate transaction.
What is a Home Appraisal?
A home appraisal is a certified appraiser’s report of the estimated value of a home. Whenever someone uses a home or other type of real estate as security for a loan, the lender will order an appraisal to be conducted by a third party licensed real estate appraiser. Lenders will typically only lend to a borrower 65-80% of a home’s value on most standard loan products. In order to provide an accurate loan amount, the lender needs to have an accurate idea of the property’s worth. So, to determine the loan amount, the first step is determining the objective value of the property. This step is critical from the lender’s perspective because it reflects the likelihood the property will sell for at least the amount of their investment in it.
A home appraisal is typically centered around the research of comparable home sales nearby. the appraiser’s analysis of the home, and the appraiser’s overall judgment of the property they are inspecting. The reason mortgage lenders will require a home appraisal is to gauge the risks of extending the loan. If the borrower defaults for any reason, the lender seeks to ensure they are still in a strong financial position to get their money back via the sale of the home.
Home Much is a Home Appraisal?
Some might wonder how much a home appraisal costs. A home appraisal’s cost is typically in the $300-400 range but can vary widely based on the home’s location. For example, in some metropolitan areas, the fees and quote for a home appraisal might span between $600-$1000 for a larger property. In terms of who pays for the home appraisal, that depends on if a mortgage is involved. In the case of there being a mortgage, the lender hires an appraiser, with the home buyer paying for the appraisal. Likewise, if a homeowner is refinancing a mortgage, they will front the bill for the appraisal as well.
Once the physical inspection and sale analysis has been completed, the appraisal service will provide a home appraisal report.
What is Included in a Home Appraisal Report?
Appraisers are licensed by their respective states after completing coursework and/or a job internship that helps them become familiar with their local real estate markets. The appraisal process itself begins with a thorough inspection of the property being appraised to determine the true physical condition of the property. The time it takes to complete a home appraisal will vary based on the property size and complexity. The appraiser will look at features like the number of bedrooms and bathrooms to ensure that they really exist and are in good condition. Most important, the appraisal looks for any obvious features or defects as well as recent upgrades, updates, and improvements that would affect the value of the house.
There are numerous factors that an appraiser will consider when completing a home appraisal. Some of the most common factors that will be reflected within the final calculation of a home appraisal include:
Why Would You Get Your House Appraised?
Now that we understand what a home appraisal is and what goes into a home appraisal report, it’s time to explore why home appraisals are so important. We’ve covered that home appraisals are a necessity when buying or selling a home with a mortgage and when refinancing a mortgage because the amount a lender will lend is directly tied to the property’s value. While this is the most common scenario for ordering a home appraisal, there are a few other occasions when an appraisal is appropriate.
Benefits Of Home Appraisal for Sellers
If you’re on the selling side, a home appraisal shows you how much you can realistically ask for your house. The appraised value should not be confused with the asking price, offer price, or sales price. Asking price is what a seller indicates as a fair and reasonable offer for his/her home. A seller is free to set whatever asking price he/she chooses. An offer price is based on the buyer’s discretion and the sales price is the final transaction price.
From the seller’s standpoint, a low home appraisal indicates that the asking price needs to be lowered to realistically sell the property in a timely manner. Gathering information about comparable homes nearby and understanding the details of your home that you might not notice or even know, like a larger lot size or nearby schools. If the neighborhood’s nearby homes are also not selling, speaking to an appraiser may be able to increase the appraised value by their inspection of other attractive features that might drive the value up.
Benefits of Home Appraisals for Buyers
If on the buying side, a home appraisal shows the home buyer a black and white picture of the home’s value. By understanding the home’s appraised value based on the factors we’ve covered above, as a buyer, you can ensure that the price you’re paying is indeed in line with what the banks consider a fair market value. By having a clear picture of a market value, buyers can make an educated call on their offer price. An offer price, on the other hand, is a number that the buyer feels he/she is willing to pay after an appraisal has been completed.
A home appraisal may be an accurate reflection of the true market value of a home, or an attempt by the buyer to purchase the property at a considerable discount. As a buyer, you should always look out for sellers that are asking for a price much higher than the home’s value, because this tremendously impacts the bank’s loan amount. The sales price is what the buyer and seller actually agree upon through negotiations; it generally lies somewhere between the asking price and the offer price.
Contact 180 Homes for All Your Real Estate Needs
As a home seller, you may wonder if there is a way to skip a home appraisal for your home. We have good news! Here at 180 Homes, performing a home inspection or home appraisal is NOT a contingency of our cash-as-is offer! Since we’re paying cash, a third-party appraisal isn’t needed the same way a typical financed buyer would require. If you’re interested in a less stressful real estate transaction, 180 Homes is the trusted resource. Learn more about 180 Homes' simple as-is cash offers TODAY!
If you’re selling your home and wish to forego the home appraisal process, your best bet is to find a cash buyer for the home. 180 Homes can help you skip the home appraisal, with our cash as-if offers on Long Island homes. We can help home sellers achieve their real estate goals and avoid the pesky back-n-forth process of finding a seller and getting to escrow. Contact 180 Homes' today to learn more!