If you are a potential new homeowner, you’re probably already dreaming of all the space in your new space. Likewise, if you a current homeowner trying to sell, you’re likely thinking about the new kitchen in your forever home. Either way, the home appraisal process is perhaps the furthest thing from you mind. It’s not one of the more glamorous steps in the home buying or selling process. But it’s one that is pretty important. In fact, if home appraisals became a thing of the past, the entire real estate market would fall apart.
So if you’re currently in the market to buy or sell a home and have limited knowledge regarding Boise real estate appraisals, it’s time for that to change. Consider this your crash course in home appraisals and learn everything you need to know about what an appraisal is, why it’s important, how it can affect your buying (or selling) power.
What Is an Appraisal?
Very simply put, an appraisal is a knowledgeable guess at exactly how much your home and property is worth. Conducted by a professional, the assessment is unbiased and based on comparable properties in the area surrounding your home. Appraisals are generally a component of the purchase and sale process and are typically a component refinancing as well. In a sale and purchase transaction, an appraisal is used to determine if your home’s contract price is fair, considering its location, condition, and features. In a refinance situation, the appraisal helps guarantee that the lender isn’t giving you more money than the home is actually worth.
Why Is an Appraisal Important?
In short, no credible financial institution will approve your loan without an appraisal. The appraisal itself helps a bank or lender determine what your home (the collateral) will sell for in the event that you are not able to make good on your payments. In other words, an appraisal prevents the bank from lending you $500,000 when the home you are purchasing is actually only valued at $100,000.
What Does the Fine Print Say?
When it comes down to it, appraisals are important. However, they can bring some element of tension to the party because an appraisal is conducted after you’ve decided on a sales/purchase price and you have signed the contract. With that in mind, it’s best for everyone involved for the appraisal to come in as close to the settled price as possible.
That being said, if the negotiated price is high compared to the value assessment, you aren’t necessarily obligated to purchase the home in most cases. However, if you haven’t read the fine print carefully, it could mean the exact opposite.
Your sales-and-purchase agreement should include a clause that addresses the possibility that the appraisal comes in below purchase price and allow you to terminate or renegotiate the agreement. If that condition is not written into your contract, it could mean that you are contractually obligated to cover the difference.
Who Covers the Cost of a Home Appraisal?
In most cases, the seller pays for the appraisal at closing, which can be as much as several hundred dollars. According to data collected by HomeAdvisor.com, the national average cost for a property appraiser’s services is $326.
How Does an Appraisal Differ from an Inspection?
While often confused, appraisals and inspections are not the same. Both an appraiser and an inspector survey your home, taking a good look at it, but each is conducting the assessment for a different purpose. The appraiser is assessing the value of your home while the inspector is looking for defects that may cause you issues later. That said, if an appraiser notices a problem, he won’t ignore it and may even request an inspection if it’s something like problematic wiring.
How Long Does an Appraisal Take?
The appraisal process used to take two to three days; however, since the recession, it’s more like a week or more. Underwriters can ask for significantly more information about your home than they could previously, and gathering that data can take time. The one drawback is that the length of this process can sometimes alter the closing date on the home.
What Factors Impact the Appraisal?
Several different factors go into determining the worth of a home and property. The appraiser looks at important characteristics of the home, such as livable square footage, number of bathrooms and bedrooms, and the general condition of the home. After identifying these components, the appraiser compares it to recently sold homes in the area. That said, these recently sold comparables are the main factor in appraising your home.
How Can You Improve the Process?
This is a common question that most homeowners ask. But there is nothing you can do as a homeowner to expedite or improve the appraisal process once it has begun. Before the appraiser comes, though, you can take a few reasonable steps.
You want the property to look as good as it possibly can. Helping the appraiser see your property in the best light possible could possibly settle a value closer to the upper end. Be sure to do simple things like mow the lawn, trim the bushes, and weed the landscaping. Likewise, clean your home, turn on indoor lights, and open the curtains and blinds to let in as much natural light as possible.
Additionally, take some time to write out a list of repairs and improvements that you have made over the past several years. You’ll want to make sure the appraiser knows if you’ve had the roof replaced, installed a new hot water heater, or upgraded the HVAC unit in recent years. Jot down anything you can think of, and politely note it to the appraiser before he or she exits your property.
Keep in mind, though, that just because you have invested a lot on repairs and renovations, you may not see a dollar for dollar increase in your home’s value. For example, just because you recently installed a $30,000 remodeled kitchen does not mean that your house will automatically be valued at $30,000 more.
How Can Your Real Estate Agent Help?
Your Boise real estate agent should walk you through the entire process – from finding the dream home to making sure you get the most value for your money. So a good agent will be at the property to meet the appraiser and make note of any of those improvements that you have written down as well as pointing out any other relevant information.
Previously, your agent may have just been the individual who opened the door and greeted the appraiser, but now, it’s his or her job to compile any information possible to justify the price of your home. The more information you and your agent can provide an appraiser that they can’t find easily on their own, the more beneficial it is to you and your bottom line.
The appraisal process is often a stressful component of a home sale or purchase, but being equipped with a full understanding of what the appraisal is, how it works, and why it’s important to you will help you work through it with more ease. Don’t go into an appraisal unaware. Make sure you are armed with as much information as possible, and work to effectively communicate that to your appraiser.