A home appraisal analyzes the value of a property. A certified or licensed appraiser hired by the lender during the home purchase process performs the appraisal.
What happens during a home appraisal?
During an appraisal, the appraiser inspects and evaluates both the interior and exterior of the home, ensuring that the structure is still good and confirming that the space is safe. The appraiser also notes if there are major upgrades made to the property since the last transaction. They may also provide photographs of the home. There is a chance that the homeowner may be present during the visit. Similarly, the buyer may also opt to be there, although this is uncommon.
There are two ways to determine the value of the property. First is the sales comparison approach, where the appraiser will research on recently sold homes in the market, with the goal of comparing the prices. This step is essential in determining the value of the property. Appraisers also typically review certain records, including home sale information to obtain comparative information. The second method is the cost-based approach, which takes the sum of how much it costs to build the home at present and the value of the land.
Why is a home appraisal important?
A home appraisal can benefit all parties involved and protect their interests. It protects lenders against default payments and buyers from paying more than the market price for their purchase. An appraisal may also establish reasonable value and can potentially impact numerous parts of a real estate transaction, including loan approvals and terms.
Furthermore, the appraisal may also play an important role when negotiating the selling price. This is particularly helpful if a home’s appraised value is lower than the initial offer as it allows buyers to renegotiate a lower price.
The appraised value of the property is directly proportional to the tax bill, so it might affect how much you pay for property taxes.
A home appraisal can be costly and time consuming, but it is an important step in the process of purchasing a home as it allows buyers in making smart mortgage decisions.