Why an appraisal may be a good idea for buyers
Let’s say you’ve found the home of your dreams and have already been preapproved for a loan. But is that home really worth what you’re willing to pay? With an appraisal, you — and your lender — will get the answer.What is an appraisal?
An appraisal is an unbiased professional opinion of a home’s worth. It helps to establish a property’s value—the likely price it would sell for if offered in an open and competitive real estate market.The appraisal process at a glance
While the appraisal process can vary by state, there are three main parts you should know about.
1. The inspection – A licensed appraiser views the home and examines its condition to make sure the property characteristics match public records.
2. Comparables – The appraiser researches similar homes in your area and considers recent sales to determine fair market value.
3. Final appraisal report – Using the data gathered from the inspection and market research, the appraiser issues a final appraisal report.Common factors used as comparables for an appraisal Location – Typically, homes in an appraisal will be those closest to your address. But there are exceptions. For example, a comparable within a block or two may not be accurate because it sits on a hill and has sweeping views. Price per square foot – When looking at square footage, make sure you understand how the property was measured and whether the square footage included a garage or any detached buildings on the property. Recent home sales – The housing market can be volatile, therefore the most current home sales
will be the best reflection of property value and what your home may be worth. Additional factors – Individual characteristics of the home are also considered. These can include: curb appeal, nearby amenities, traffic and noise, neighborhood desirability, and school quality. You have a right to a copy of your appraisal report
Lenders are required to notify you of your appraisal rights no more than three days after you apply for a loan. Also, by law, when you apply for a mortgage, the lender must give you a copy of the appraisal of the home you are purchasing or refinancing.
So think about an appraisal when you find the house of your dreams, to help ensure you’re paying what it’s really worth.