How are homes appraised? Most appraisals are performed by trusted professionals who have years of training and experience in providing credible data. They are certified to research and give an excellent value of a home without any form of bias no matter the location of the house.
The information provided by the appraiser has to go with a report, including substantial evidence on the appraisal they give. Most appraisal firms and their employees are significantly regulated to ensure factual information is provided. If found to be involved in any form of biasness or providing information that may be misleading, there are severe consequences they can face. Due to this, most home appraisers tend to keep their professional careers spotless and avoid making judgments based on their own interests and gain.
Why Do Homes Need To Be Appraised?
The main reason homes are appraised is to get the right worth for clients who want to make home purchases. This also could affect whether they’re issued a mortgage loan that prevents them from getting enough financing to purchase the home. The appraisal is vital for both parties, the seller and buyer to know if the asking price of the home is legitimate and if the property has either a lower or higher value. Whichever the case, it will open room for price negotiations between the two.
To know this, the evaluation of the property is done based on both exteriors and interior layout of the home. They can also research unique factors that can affect the value of the property. Most of the guidelines on what to look for are given by the lender to the appraiser. The buyer often pays the cost of the appraisal. It is typically paid along with the closing costs of the home. The appraisal service cost mostly ranges in the hundreds of dollars, but varies depending on the appraisal firm you might be considering to use. The following is a step-by-step process on how homes are appraised.
How Are Homes Appraised? The Appraisal Process
The appraisal process doesn’t happen before the price is negotiated. There has to be a starting point on the price even before you seek an appraisal service. The appraiser needs ample time to visit the home, get every bit of information they need, and produce a substantial report to the party that has requested the appraisal service. The lender might be the one who schedules the date when the appraiser can visit the property.
Below are some steps involved in home appraisals that are mostly used by appraisal firms and employees. These are mostly residential appraisals that are uniform and have standards that are used by firms that back a lot of residential mortgages. The process includes the following:
The appraisal inspection is the first step towards finding the true value of a home. One inspection that has always been part of an appraisal is determining the structural stability and shape of the interior as well as the exterior part of the house. The inspection of these fundamentals is mainly done to confirm if there are safety-related concerns or not. The appraiser also has to note how many rooms the home has and to see if there are previous upgrades done to the house from the last transaction done on the property.
For more precise information for the report, photos are essentials. The appraiser has to take pictures of different angles of the home, including the vital parts when they are conducting a thorough inspection. Most of the photos taken relate to the determining factors of the value of the house.
Types of Appraisals
There can be different appraisals depending on the type of loan you are getting. Government-backed loans have other rules when it comes to their appraisals compared to conventional loans given for homes. Government-backed loan appraisals have a more thorough inspection, which can include testing of the home’s appliances and other utilities to report their condition. These added inspections are part of the government set rules. So, in case you see an appraiser doing an inspection that seems unconventional, just know this could be because of that.
Can you be present during the inspection?
During the inspection, there are no set rules of who should or should not be present. The appraiser can decide to visit the home alone; they can also contact the buyer to be with them or even conduct the inspection when the current homeowners are still around. But it is more common for them to do it alone, rather than with people everywhere.
Home Appraisal Research
After the inspection, conducting research is a vital part of the appraisal process. Its main purpose is determining the value of a home by comparing it with similar homes that have been sold around the same geolocation within the same property market. The house that is going through appraisal may be identical in structure and amenities to the other houses close to it, so using information that is already public will be a great place to start on the valuation of the home.
Since most of the records are public, appraisers are allowed to use them, and they can get them from government records and even from the Multiple Listing Service firm. The MLS has a database that has home sale information from the listings to the sales, since real estate agents and professionals directly post them within the same area. You can get data from the database online for free.
There is more than one approach that the appraiser can use to determine and assess the home’s value. The first approach is using the sales comparison approach if they think this is the best way. Alternatively, they can use the cost-based method. With this alternative approach, the appraiser can estimate what it would cost to build the same home based on the current economic state with a combination of the value of the land it is situated on.
Decoding the Home Appraisal Report
After the inspection, research and valuation, you will get an appraisal report that shows all the information you need to decide if the home is worth getting a loan on. The chances are that you will skip all the other pages to go and check the final value given for the home. If the value is almost the same with the initial sale price you were given, then you will have no issue obtaining a loan once you settle on the purchase amount.
It is crucial that ensure that any issues that may emerge in the appraisal report are sorted to avoid any inconveniences in the future. Closing delays are a setback for both parties and lead to the termination of contracts. If the report shows a value that is higher or lower than the first stated value, then you have a right to go back and make significant negotiations based on the report you have received.
The appraisal report will include the following for it to be complete:
- The Value – The value information includes the market value and the date that it has been effective. The time of the value usually only lasts for up to 4 months.
- Characteristics – It lists the parts of the home, such as features and conditions of each room and even utilities.
- Market Background – The market background can include the information on the location of the home and comparability between the other houses to determine the home’s value if the appraiser decided to take this approach.
- Special Instructions – The document can list any special instructions asked by the lender or any other real estate agencies.
After completion, the report first goes to the lender and then gets sent to the buyer. This is done within three days, right before the closing date.
If you do want to negotiate a different price, the faster you go back to the drawing board, the more quickly the closing will happen, and both parties can enjoy the benefits that come with it.
The time it takes to perform an entire appraisal process is mainly dependent on the size of the home. Appraisers do take their time to get all the nitty-gritty details needed to provide the best information possible. An appraiser may take just thirty minutes when doing inspections for a small home, but for a bigger house, they can take a couple of hours. Before the actual appraisal, the appraiser will have to schedule a time with you as well, which will depend on the amount of work he has to do on other homes. Completing the final report might be faster after the inspection and research. It all comes down to the workload the appraiser has at one particular moment.
If it is peak buying season, your appraisal firm may be busier than ever before so you will have to be a little bit more patient to get your appraisal done on time. It may take a couple of days or even a week, but it is worth the effort to avoid any future hurdles on your home. ExcelAppraise has more information if you want to know about how homes are appraised.
Call ExcelAppraise To Learn More About How Homes Are Appraised
Home appraisals are slowly becoming a necessity for almost all types of loan-based home purchases. Learning how homes are appraised doesn’t have to seem like a daunting process for the buyer or the seller. The more information you get on your home value, the better so you can determine if you are making the right choice. Call ExcelAppraise at 1-801-882-2292 to learn more about how homes are appraised or request a free quote today!