Before a bank or lender gives you money to purchase a home, that lender is going to want a good, solid estimate of how much that home is really worth. A bank doesn’t want to give you $500,000 to buy a home if it turns out the home is only worth $250,000.
As the buyer, you don’t want to be on the hook for a bigger mortgage than your home is actually worth, either. And that means that before you get a mortgage, you’ll need to get an independent home appraisal.
What’s a home appraisal?
A home appraisal is an assessment of the actual, fair market value of the home. The appraisal is going to factor in everything that would make other potential homebuyers want to pay more or less for the home. That includes the size, location, and condition of the home. It also includes considering the value of comparable homes in the same area or neighborhood.
Who does the appraisal?
Appraisals are conducted by independent, third-party certified or licensed home appraisers. It’s against the law for anyone with a financial stake in the mortgage transaction to attempt to steer or influence an appraiser. So most lenders will order an appraisal through a totally separate appraisal management company.
That appraisal management company will choose a random appraiser who is knowledgeable about the local property market to conduct the appraisal. (There are a few lenders who operate independent in-house appraisal departments. But even then, the process for selecting an appraiser randomly to ensure he or she has no skin in the game is the same.)
What is an appraiser looking for?
An appraiser is first looking to assess the basic physical characteristics of the home: it’s size and square footage; the number of rooms, bedrooms, bathrooms; and whether the interior and exterior of the home are in good condition. The appraiser will also factor in the location, lot size, the view. How well the home fits in with the other homes in the neighborhood matters, too. The appraiser is going to research sales of similar homes in the area, to see how your home might compare.
Can you influence the appraiser?
It’s illegal to attempt to influence an appraiser’s valuation. But if you own the home, you should do what you can to make it easy for an appraiser to see your home’s value. That means it’s a good idea to tidy up and clear away clutter. Same goes for mowing the lawn and trimming the hedges. If it’s time for a new coat of paint, it won’t hurt to get that up before the appraiser’s visit.
Once the appraisal has begun, the actual valuation is out of your hands. But you’ll want to be sure you are presenting your home at its best.
How much does an appraisal cost?
The costs vary from state to state, and depend on the level of detail required from the appraiser. Also, if your home is potentially worth mega-bucks, it’s not unusual for a lender to demand more than one appraisal. You know, just to be extra sure the estimated value of the property is correct.
Most of the time, the buyer pays for the appraisal. Because appraisals usually happen early in the mortgage process, most lenders don’t front the money for the appraisal.
