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A home appraisal provides a lender with an expert opinion of a home’s fair market value at a specific point in time. As a home buyer, this is important because lenders use the appraisal to determine if there’s enough equity (value) in the home to support the amount you are requesting to borrow.
Appraisals are conducted by independent, state-licensed professionals. If the appraiser’s assessment of the home’s value is less than its purchase price, the buyer may have to make up the difference in cash.
An appraiser’s evaluation typically has three parts:
Depending on the size and complexity of the property, the appraiser can take a couple hours to complete an examination. It can include:
Next, the appraiser will use a wide variety of information to help with the valuation process. They’ll look at recently sold homes of similar size and style in the area, municipal records, online data sources, sales and listings in the neighborhood, and tour the immediate area.
Then, the appraiser completes a written report with the estimated value of the home as of the date the property was inspected. The lender reviews the report and provides the buyer with a copy.
For obvious reasons, the seller wants their home to appraise as high as possible. With that in mind, there are many things a seller can do to help raise the value of their home before the appraiser arrives. They include:
The seller could also proactively repair any damage ahead of time that the appraiser could log in their report.
Appraisal costs can vary by property type, complexity, and location. For most basic single-family homes and condos, you can typically expect to pay between $500 and $750. However, check with your lender for an estimate based on the house you’re looking to buy. The lender will charge the borrower for the appraisal.
Note: A home appraisal and a home inspection sound alike, but they’re not. A home inspector is hired by the buyer to perform a thorough examination of the home to uncover any potential issues or problems before closing.
Buying a home is an exciting time. Our dedicated colleagues can help you find the right financing option to make your dream home a reality. If you have questions about appraisals or other parts of the mortgage process, talk to a Citizens Bank Loan Officer.
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