What Is A Home Appraisal, How Much Does It Cost, And How Does It Affect Your House?
7-minute readMarch 07, 2022
If you’re on the path to purchasing a home, you may be wondering about what a home appraisal is or how it fits into buying a home. Home appraisals are ordered in nearly all purchase or refinance transactions of real estate. Just about the only time you might buy a house and not have to get an appraisal is if you’re buying a house with cash. If you have the cash to buy your home outright, then you’ve bought yourself the right to spend whatever money you want! But, if you’re buying a home with a mortgage, then the bank is almost certainly going to require a home appraisal.
What Is An Appraisal?
A home appraisal is an unbiased report that attempts to determine the fair market value of the property. Before lending money, the bank typically wants to make sure that the property is actually worth (at least) the purchase price. If the appraisal comes back with a home value that’s less than the purchase price, the bank may require you to put down more money as a down payment. So, if you’ve been saving for a down payment, you may end up needing to save additional money.
An appraisal is usually ordered after the buyer and seller have both agreed on and signed a purchase contract and is part of the process between a signed purchase contract and the closing date. This is after the initial preapproval process where you’ve already determined with the bank what credit score you need to buy a house.
What Does An Appraiser Do?
An appraiser is a professional who’s required to be licensed by the state. In most cases, they’re required to take classes and serve an internship in order to receive their license from the state. Appraisers are involved in most real estate transactions and serve as an unbiased third-party opinion as to how much a home is worth.
What Do Appraisers Look For?
Most appraisals come in two different stages. First of all, an appraiser will note some of the subject home’s information, such as number of bedrooms, bathrooms, total square footage of the home and size of the lot. Other amenities that might factor into an appraisal include a garage, carport, driveway and the overall location or neighborhood of the house.
Once an appraiser has all of that information, he or she will look for sales of comparable homes within a short radius of the subject property. That helps the appraiser determine how much similar properties are being sold for. Those comparable sales or “comps” are the main factor in determining the appraised value.
Depending on the type of appraisal that the bank orders, the appraiser may only do a “drive-by” appraisal, where they’ll look up comparable sales and then drive by the home without coming inside. If a full appraisal is ordered, the appraiser will likely be inside the home as well, usually for about 15-30 minutes.
What Hurts A Home Appraisal?
While most home appraisers are not looking for cosmetic issues like whether or not your child’s toys are put away or if the kitchen sink is full of dishes, it never hurts to make sure things are as neat as possible when the appraiser comes by. Consider it an extension of the time that you had your home staged for open houses and potential buyers.
Most things that can hurt a home appraisal are things that you don’t have much control over, such as the location or neighborhood, the size of the home or lot or the number of bedrooms or bathrooms the home has. But, there are a few things that can impact a home’s appraisal value that you might be able to control:
- The condition of the foundation and exterior walls
- The condition of exterior items like the roof, gutters and downspouts
- The condition and age of major mechanical systems like the furnace, air conditioner, plumbing and electrical systems
- General maintenance and upkeep, like peeling paint, leaky faucets or door handles that are missing
So, before an appraisal, make sure that any maintenance issues have been addressed.
How Long Is An Appraisal Good For?
There’s no set date that appraisals are good for, but most banks will accept an appraisal that is no more than 3-6 months old. Because the real estate market can change quite rapidly, appraisals that are older than that are likely to be rejected as they’re out-of-date. In those cases, the bank will make you order (and pay for!) a new appraisal.
Home Appraisal Cost
The cost of an appraisal varies widely by location, the appraisal company and the type of property. The cost of a home appraisal can range between $300 to $600 for an appraisal of a single-family home, with appraisals for multifamily and commercial properties being more.
The home buyer typically pays for the closing, and that money should be included when you calculate the real cost of buying a home or how much house can you afford. If you're still at the beginning of the purchase process, preapproval is a great way to figure out how much home you can afford. Get preapproved now to get a head start on buying your home.
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