Do you know that a home appraisal is one of the most critical factors in determining your ability to get a home loan? Whether you’re trying to obtain financing for a home purchase or to refinance your existing home, your home must appraise at a high enough amount for the lender to approve the loan. Read on for everything that you need to know about a home appraisal.
What is a Home Appraisal?
A home appraisal, accomplished by a licensed appraiser, is an honest estimate of the current dollar value of a house. The lender usually orders the evaluation, and it is important to remember that the lender cannot instruct the appraiser on an appropriate appraisal amount for a specific property.
Why Does the Lender Want an Appraisal?
The lender wants to know how much a property is currently worth in case the borrower defaults and the lender needs to sell the property. In general, you cannot get a home loan for more than the appraised value of the house.
What are the Qualifications for Real Estate Appraisers?
Appraisers must complete a combination of college and experience working with a licensed real estate appraiser to become licensed. Many appraisers specialize in an area such as farm, residential, and commercial properties. There are many government rules in place that govern the work of real estate appraising, and the appraiser must document each step of the appraisal.
Remember: The lender wants an honest estimate of the value of the house.
How Does the Appraiser Conduct the Appraisal?
Appraisers take a multiple step approach to figuring out a home’s worth. For example, the professional appraiser looks at any recent comparable sales in your neighborhood. So, if a three bedroom two bath, 1500 square foot house similar to your home just sold for $170,000, there is an excellent chance that your house might appraise for close to the same amount, especially if it is the most recent sale.
The condition of your home is also an important consideration when estimating its value. A house that is in excellent condition appraises for more money than one in poor shape.
What Does Market Value Mean?
The full market value is the price that a house will sell for in the current real estate market. Ideally, the appraised value and the market value of a home are the same. Rarely, the property may appraise for more than the sales price. Unfortunately, sometimes the estimated value is lower than the market value.
Why is a Low Appraisal a Problem?
Noone wants their home to appraise for a lower price than expected. A low appraisal can cause the lender to refuse the loan unless the borrower closes the gap between the appraisal amount and the purchase price or until the seller reduces the purchase amount to match the appraised amount. Sometimes, to complete the sale, the seller lowers the price, and the buyer makes up the difference between the reduction and the appraisal value.
Remember: Lenders don’t approve home loans for more than the appraised value of the house.
Can a Real Estate Agent Guarantee That a House Will Appraise for the Offer Price?
A reputable real estate agent will never promise that a house will appraise for a specific amount. However, an experienced real estate agent works with the appraiser to give the property that best opportunity for a decent appraisal. The real estate specialists affiliated with Homes for Heroes, for example, use their expert knowledge of their local real estate markets to assist their clients in buying and selling houses. SIGN UP to find out how Homes for Heroes can help you with your real estate needs.
Your real estate specialist can communicate with the licensed appraiser to present information that helps the appraiser value the property accurately. For instance, the real estate agent should give the appraiser details of renovations, maintenance records, results of any property inspections, and the purchase prices of recent comparable house sales in the area.
Is There Anything That the Real Estate Agent Cannot Say to the Appraiser?
It’s unethical and illegal for the real estate agent to promise future business in exchange for the desired home valuation. The real estate agent also may not ask for the appraisal to equal the proposed purchase price.
How Can You Help Your House Receive a Positive Appraisal?
Real estate experts agree that you’re more likely to get a high-value amount if the house is in excellent condition. Here are hints to help your home make a happy impression.
- Mow the lawn and pull any weeds.
- Sweep the front steps.
- Make sure the front door unlocks and opens quickly.
- Replace any damaged window screens.
- Check all of the electrical outlets and fix any that aren’t working.
- Repair any roof and gutter problems.
- Evaluate smoke alarms and carbon monoxide detectors to make sure that they are working.
- Service plumbing, electrical, heating and cooling system issues.
- Declutter so that the appraiser is able to move throughout the house.
Experienced real estate professionals also suggest that you ask your lender to use a local appraiser on your property. Local appraisers are familiar with houses and prices in your neighborhood and typically do a better job of valuing the home at close to the actual market value. Using a local appraiser is especially beneficial in areas where the housing prices are rising quickly.
If your lender decides not to use a local appraiser, it’s a good idea to provide copies of recent comparable sales and information on exciting developments, such as the opening of a new transit stop, that will spur an increase in house prices in your area. In other words, give the appraiser a reason to raise the value of your home.
Lastly, although the home appraisal process is a big hurdle that a borrower must overcome to get a home loan, it’s important to keep in mind that properties pass their appraisal all the time. SIGN UP to discover how Homes for Heroes can help you with your real estate requirements.