Appraisals aren’t necessary if you are purchasing a home without a mortgage, such as in an all-cash offer.
An appraiser is a trained and licensed professional who looks at the neighborhood, market trends, the size and condition of the house. An appraisal differs from a home inspection, where the inspector is looking to make sure that the house is up-to-date, any repairs are noted, and the structure is safe.
The number that the appraiser comes up with is utilized during the sale or purchase of a property, as well as when homeowners want to refinance.
If the value of the property is below the contract price, the parties involved will need to make a decision. If buying a home, the buyer may need to renegotiate the purchase price for the home or make up the difference – also known as “the appraisal gap.”
In a refinance situation, a lower appraisal amount means the homeowner must lower the refinance amount.
The steps of a home appraisal
Now that we understand its importance, let’s go over what happens during a home appraisal.
- Hiring an appraiser
After the seller and buyer have agreed on the price of the home, your lender will request an appraisal. Although the bank or lender orders the appraisal, the buyer is charged for this service. There are times when a homeowner or borrower may wish to arrange for their own appraisal. At these times, like when the original appraisal seems to be inaccurate, having your own assessment of the value of your property may pay for itself in financial returns.
The cost of hiring an appraiser will depend on the type and size of the property. Rocket Mortgage says costs may range from $300 to $400 for a single-family home or up to $600 for a multi-unit property. And the appraiser will not only look at the house, but the entire plot of land that it sits on, as this impacts the property value. These factors, plus the time it takes to complete the appraisal, will determine its price.
- Preparing for the inspection.
Before the appraiser arrives, there are some things sellers can do to help add value to the property. State Farm recommends sellers look at previous appraisals to see if any lingering issues caused the value to go down. Other tips include cleaning the house, sprucing up the landscaping for better curb appeal, and making minor repairs throughout the space.
Other steps to help to streamline the process include preparing your documents for the appraiser, including the land survey and the house’s value history.
You should also pick up any toys, paperwork piles, or other clutter that might make the house difficult to navigate to help the appraiser get the job done more efficiently.
- The inspection
On a scheduled date, the appraiser will come to the house and spend a few hours touring the residence, as well as the outdoor areas. With this information in hand, they’ll be able to compare the house to others in the neighborhood to help them determine the appraisal value.
Expect the report to be ready in about seven to 10 days after the visit.
If the value comes in lower than the asking price, the seller will have to drop the price before the sale can move forward, or the buyer must increase their down payment to cover the “appraisal gap.”
Remember, appraisals are only needed when a mortgage comes into play, so all-cash offers are exempt.
- Approval from the mortgage lender
Once the appraiser has prepared the report, an underwriter working for the mortgage lender (typically a bank) will review the report and the rest of the items in the loan file to ensure everything is in order. If that’s the case, the loan will be approved and the closing process can continue.
Usually, it takes 30 to 45 days to close on a house after this point.
What if I disagree with the appraisal value?
If you feel that the value isn’t correct, it is possible to ask for an appeal. Ask for a copy of the appraiser’s report and look at the factors that lead them to the number.
Is anything missing? Does it line up with the current market and neighborhood values?
If you’d like to move forward, contact your lender to request an appeal.
It’s important to know that mortgage discrimination is illegal, and homeowners are protected by the Equal Credit Opportunity Act and the Fair Housing Act. If you feel you’ve been denied a loan or your low appraisal is the result of discrimination, reference the Federal Trade Commission’s mortgage discrimination guide for the next steps.
While the closing process can feel overwhelming, knowing what to expect at each step, including the home appraisal, can help alleviate stress. Home appraisals are important in selling, buying or refinancing a home. When everyone is on the same page on the true value of the property, the entire process runs a lot more smoothly.
A better alternative
Selling a house doesn’t have to be complicated. Skip all the tedious steps — including a home appraisal — by selling your property to the home buying company, Meridian Trust.
For more than 15 years, we’ve purchased tens of thousands of homes, townhomes, condos, apartments, and multi-family units — both vacated and rented and in all conditions.
Call us for a free, no-obligation property value analysis.
If we’re able to make you a cash offer, you can decide if you’d like to move forward. There are no hidden fees, and we even cover the closing costs for you.
To get started or learn more, call us at (954) 807-9087.
Note: This guide is for informational purposes only. Meridian Trust does not make any guarantees about the sufficiency of the content in or linked to from this blog post or that it is compliant with current law. The content within this blog post is not a substitute for legal advice or legal services. You should not rely on this information for any purpose without consulting a licensed lawyer in your area.