Most people who intend to buy a property have a set price in mind. However, the value of a home doesn’t depend on a buyer’s offer or on the asking price, but on the home appraisal done by a qualified professional.
To determine the value of a property, an appraiser must assess the condition of the house and compare it to other similar properties in the area. Since the appraisal can greatly affect the market value of a property, it’s very important to understand the entire process before a qualified professional comes into the picture. Here are five things a homeowner should know before getting an
- Components of a home appraisal – Though the home appraisal process can vary by state, it often includes: an inspection conducted by a licensed appraiser, who will check the exterior, interior, amenities, and upgrades; comparables, or comps, which is a term indicating properties, including recent sales, similar to the home being evaluated; and a report that contains a summary of the methods used to determine the value of the property, the purpose of the appraisal, relevant property characteristics (e.g. size and condition of the house, any improvements made, information about the area, etc.), the appraiser’s opinions and conclusions, a comparative market analysis, photographs, sketches, and other documents that support the appraisal, and the date of the report.
- Factors affecting the value of a property – The value of a property is typically influenced by real estate market trends, the size of the property, recent sales of similar homes in the area, amenities (bedrooms, bathrooms, balconies, garage, swimming pool, etc.), and improvements (e.g. air conditioning, security systems, smoke detectors, eco-friendly features, such as solar panels, geothermal system, wastewater treatment system, E-windows, etc.). In addition, the appraiser must note all the factors negatively affecting the value of the house, including location, age, maintenance and repairs needed.
- Advantages of a home appraisal – Since a lender will never approve a loan amount higher than the appraised value, the main advantage of getting an appraisal is that it helps a homebuyer avoid overpaying for a property. Additionally, if the appraised value comes in lower than the asking price, it can be used as a negotiating tool to persuade the seller to lower the price.
- Home appraisal fees – Although appraisal fees vary by state and depend on the specifics of each property, including the type, size, and location, an appraiser should charge customary and reasonable fees for the area. For instance, a person who lives in Florida can expect to pay between $300 and $450 for an appraisal of a standard single-family home. Additionally, the fees must be paid at the time of the appraisal, regardless of whether the home buying transaction will be completed or not.
- Differences between home appraisals and inspections – Another thing a homebuyer should know is that there are some significant differences between a home appraisal and a home inspection. While a property appraiser will make note of the most obvious issues (e.g. defects, cracks, leaks, etc.), a home inspector will check everything, including the structural components (e.g. foundation and framing), insulation, ventilation, sidewalks, driveways, drainage, roof, plumbing, doors, windows, electrical system, heating system, air conditioning, security features, appliances, countertops, cabinets, sinks, faucets, etc.
When everything goes smoothly, the home appraisal is just a formality a homebuyer must comply with to get through the home buying process. Regardless of whether a person intends to buy, sell, or refinance, understanding the appraisal process can only work in his favor, allowing him to get his dream home without spending more than it’s actually worth.