Buying your first home can be exciting, and maybe even a bit overwhelming with all of the steps involved with finding and closing the deal on your new home. One of the necessary steps of buying any home is getting a home appraisal. This is a professional assessment of what the home you have your heart set on buying is really worth. There are many different types of appraisals and having a basic understanding of them and how they work can help take away some of the mystery.
When you’ll need an appraisal
So you’ve found your dream home and the price is in your range. It seems like everything is lining up for you to make an offer on your dream home. You make an offer, the home is inspected and everything is moving forward. But there’s one more step: the appraisal. As a buyer, you will be the one paying for an appraisal and the price will depend on the size of the home. The whole process could take anywhere from three to 10 business days and typically, an appraisal is required by your lender and will be sent to them as part of the home mortgage approval process.
The basics of an appraisal process
Your realtor or lender may be your best source to find someone who you can trust for an honest and accurate assessment of your future home. Ideally, you want an appraiser who knows your neighborhood and the market for other homes in the area. They will use an analysis of comparative homes in the area or what realtors call “comps” to see how your potential home aligns with other similar ones on the market. Features they will take into account in their assessment are square footage, wear and tear, extras like a pool or backyard, and the number of rooms and bathrooms. Homes that need a lot of repairs can see their appraisal value decrease as compared to other homes with similar features.
What if the price isn’t right?
After the home appraisal, you might be surprised at the value that the appraiser comes back with. If the value is less than the home’s sale price, the lender is likely to reduce your loan amount to align with that lower value. If the value is more than the home’s sale price or about equal, you are likely to still get the loan amount that you applied for. A low home appraisal, however, can delay or put a sale on hold as it can create a situation where the whole selling and lending process needs to be reassessed. You may also need to negotiate a reduced sale price with the seller. If the appraisal comes in higher than you were expecting, it’s always possible to dispute it by working with your agent to compare the home with others in the area.
The appraisal is one of the many steps in the home buying process but like everything else, if you know what to expect, you can move forward and be that much closer to moving into your dream home.