The What’s What On Appraisals

Appraisals are how lenders determine a home’s value. Whether you are buying or refinancing, appraisals demonstrate what the home is worth based on its features, neighborhood, and comparable properties nearby. They’re a great tool in getting you an honest value for your purchase, or the equity you want in a refinance. Better yet, if an appraisal comes back low, you might be able to negotiate a lower asking price.

Why Do I Need an Appraisal?

As a buyer, you want to make sure the home is worth what the seller is asking, and the lender must ensure you’re not borrowing more than what the home can represent as collateral. If the worst-case scenario occurs and you default on your loan, the lender will sell the home to get back its money. So the appraisal helps the lender protect itself.

What Does the Appraiser Look For?

A third-party appraiser will conduct the evaluation – no one involved in the transaction (buyer, seller, lender) selects them, therefore eliminating any bias. VA loans require their own licensed appraisers from their approved list, but they, too, are third party.

Appraisers are tasked with looking at the condition of the home. Although certain renovations can increase a home’s value, they aren’t looking at the glitz, glamour, or furniture, but what’s actually permanent in the home. They check on physical characteristics of the home, age, bedrooms and baths, location, square footage things of that nature. Is there water or mold damage? What shape is the plumbing in? How is the roof and other structures within the home?

Once the final report is in, it will be issued to you to discuss with your Mortgage Banker.

When Does the Appraisal Take Place?

The appraisal process starts right after you make an offer. Depending on the appraiser’s schedule, it can take one to two weeks, and your Mortgage Banker will keep you informed each step of the way. Appraisals and home inspections both costs around $350-$500 and are typically paid by the buyer.

Appraisals Are Not Home Inspections

Appraisals are different from home inspections. Unlike home inspections, which are a voluntary measure to check out the home’s system’s like roof and HVAC, appraisals are required to issue a loan. That said, Atlantic Bay recommends home inspections for all homes except newly built homes under builder warranty.

What Happens Next?

If everything goes well, the appraisal report is added to your file and you are one step closer to closing. The underwriter will review your loan to make sure everything is in order to be approved. Then you’ll review your final settlement documents, perform a final walkthrough, and hopefully get to that closing table!

Making sure the home is worth it both for you and for your lender is critical. We’re happy to assist you along the way. If you have any other questions, we’re always here to help.