The Basics Of The Appraisal Process
A home appraisal is similar to taking your car to the dealership and getting its value appraised for resale. The difference is that the dealership has a handy little book that keeps track of how much a car is worth, while the real estate appraisal process is a lot more complicated. In fact, in the current economy many sellers are learning to dread a home appraisal because their house isn’t worth what it used to be. How does an appraiser determine a home’s worth?
First, both sellers and buyers need to be aware that the appraiser is a third party who is working for the lender, who wants more information before they decide to loan the buyer money for the home. Therefore, the appraiser reports to the lender, not to the buyer and seller.
Secondly, the appraiser will look at several issues with the house. One is the size of the home. How many bedrooms? Bathrooms? How big is the lot? What school district is it in? How desirable is the neighborhood? How much have nearby houses sold for? While some information, like desirability, can be subjective, most of the home appraisal will focus on objective facts.
Third, the appraiser will make note of any problems. This does not mean that the appraiser will take note that the house is dirty and the owner is a poor housekeeper who doesn’t do their laundry. What the appraisal process will focus on are problems with the home itself, such as cracks in the foundation or a serious termite infestation. Also, unless the buyer is getting a FHA loan, appraisers are not required to pass this information along to either the buyer or seller.
Finally, based on all of this information, an appraiser will decide on the home’s value and report to the lender. If the home appraisal is more than what the seller is selling for, most lenders will be happy to oblige the buyer with a loan. However, if the value is less, the lender is likely not going to approve the loan.
Photo © Sujin Jetkasettakorn
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