Whether you are buying a house or selling a house, you are most likely not focusing your thoughts on the home’s appraisal. When you’re about to buy a home, you’re thinking “Will I be able to fit all my kitchenware into these cabinets?” or “Which room should our home office be in?” When you are selling, you are thinking “I can’t wait to decorate my new space!” or you’re wondering how much you’ll be able to get for the home you’re selling. Although the home appraisal isn’t the most exciting part of buying or selling a home, it is an important part of the process. Its time to get educated!
A home appraisal is a process by which a professional “appraiser” visits a property to evaluate its size, function, condition, and quality. This helps to establish a property’s worth – its as-is market value. This is definitely an important figure to know when buying or selling your home so that you can see if you are receiving/offering a reasonable price. There are a few steps in the appraisal process.
In order to get an appraisal, a licensed independent professional appraiser has to be selected by the Appraisal Management Company (AMC). It is very important that the appraisal is done by a third party. By law, the appraiser can have no interest in the outcome of the appraisal.
Why are appraisals so important, you ask? No financial institution will lend a homebuyer money without an appraisal. The appraisal protects both the lender and the buyer so that they don’t purchase a highly overpriced home. Appraisals exist for a good reason because they keep the real estate market honest. It is like a system of checks and balances. The part that is stressful for all parties is that the appraisal is done after the buyer and seller have already negotiated a price, agreed on it, and signed the contracts. So… hopefully the appraisal comes in around the purchase price or there’s going to be somebody who feels like they got gipped.
The seller will usually be the one to pay for the appraisal (which costs a few hundred dollars) because they are usually required to cover all the “closing costs”. The appraisal process can take between 1-2 weeks, so just beware of this possibly messing up your closing date. Don’t get an appraisal confused with a home inspection because they are two different things. The home inspector will usually come first to see if there are any major problems or repairs that need to be made on the property that would be a possible financial burden on the future buyer. These things would need to be disclosed to the buyer and might even need to be paid for by the seller. The appraisal comes after that and will determine the fair market value of the home!