You’ve found your dream home and now it’s time to cross all your T’s and dot all your I’s before it’s all your own. And one of the first items on your closing checklist the home appraisal. So, what exactly is that?
The home appraisal is essentially a value assessment of the home and property. It is conducted by a certified third party and is used to determine whether the home is priced appropriately. The appraisal gets ordered through your lender so no need to start searching for an appraiser. This is almost always paid for by the home buyer up front.
During a home appraisal, the appraiser conducts a complete visual inspection of the interior and exterior of the home. He or she factors in a variety of things, including the home’s floor plan functionality, condition, location, school district, fixtures, lot size, and more. An upward adjustment is generally made if the home has a deck, a view, or a large yard. The appraiser will also compare the home to several similar homes that were sold within the last six months in the area.
The final report must include a street map showing the property and the ones’ compared, photographs of the interior and exterior, an explanation on how the square footage was calculated, market sales data, public land records, and more. The price per square foot is also a factor taken into consideration… the value of the home your purchasing will need to be “inline” with other comparable homes. It’s tough to say a home selling for $250/sq. ft is inline with values if other homes in the neighborhood are selling at $175/sq ft.
Depending on your loan type, the appraiser may also be looking for certain property conditions. This occurs mostly with USDA, FHA, and VA loans. They will look for things like GFCI outlets near water sources, chipped/ peeling paint, handrails on stairs or ledges of a certain height, roof condition, standing water in the basement. They DO NOT do a full home inspection!! They have a list of guideline for conditions that need to be noted. If there are any items of concern, the repairs must be make with a follow up visit by the appraiser to be sure the conditions were addressed prior to closing.
After the report is complete, the lender uses the information found to ensure that the property is worth the amount they are investing. This is a safe-guard for the lender as the home acts as collateral for the mortgage. If the buyer defaults on the mortgage and goes into foreclosure, the lender generally sells the home to recover the money borrowed. It can be tough waiting around for this important piece…. from the time it’s ordered to the time the report is received by the lender, it can take anywhere from 5-10 days on average. The more unique, complex, or remote a property is, the more difficult it is for the appraiser to evaluate. Be paitient.