Understanding Home Assessments
What is a Home Appraisal Are you interested in knowing what to anticipate from your property or home appraisal? Real estate appraisals are an integral part of buying and selling a property, especially if the buyer is seeking financing from a lender.
The appraised value of a home can make or break a sale, so it makes sense to give it that much weight.
Whether you buy or sell, you have minimal control over a home’s valuation – but that doesn’t mean you have to be in the dark about what it entails and how it’s determined.
There are many myths about real estate appraisals that people usually find out the hard way. As a buyer or seller, it’s essential to have at least a general understanding of how reviews work.
Below, I’ll summarize what you need to know about home appraisals. These 17 assessment questions should help you learn more about the process.
Use it as a guide to understanding the home valuation.
Is there a difference between a home appraisal and a home inspection?
Granted, the vast majority of real estate transactions involve both a home appraisal and an inspection, but they are very different things.
The nationwide property and appraisal services focus on determining the market value of the home. The worth is based on numerous elements, including the price of similar homes in the area.
A home should identify problems with the home. While an appraisal can look for obvious flaws, a home inspection goes much, much further. However, with some types of loans, they can get mixed up.
For example, with an FHA loan, certain conditions that a home must meet to be approved for an FHA mortgage. It is the sellers’ responsibility to understand how to make their home FHA mortgage compliant. Why? An important percentage of home purchasers will utilize FHA financing to buy a home.
When a borrower uses FHA financing, the appraiser will examine the home to make sure it meets the FHA minimum standards for the condition.
What is the home appraisal process?
Like a home inspector, a real estate appraiser will go throughout the house to inspect its working condition, features, square footage, etc. Importantly, the appraiser looks for all the factors that determine the general market value of a property. People often ask what an appraiser does. You can find out in this comprehensive resource. Another name for a home appraisal is an “appraisal”.
The appraiser will go through each room, taking note of all the details, large and small, that are needed to accurately compare the home to other homes in order to measure its value.
When all of the home’s details are put together, the appraiser can look at recent sales of similar homes – looking for properties as identical to yours as possible – and make a comparison to provide the final appraisal price.
The real estate appraiser will be licensed and insured to perform an appraisal. Valuing a home is an art and a science
Are there different types of real estate appraisals?
The most common type of home appraisal is when an appraiser visits home and inspects both the interior and exterior of the property. A walk-only inspection is also possible, known in the industry as a “drive-through”.
A drive-through appraisal is certainly not as comprehensive and is often used when the lender has no doubts about the value of a home supporting the mortgage amount requested.
What will you note in a real estate appraisal report?
An appraisal report will contain specific details about the property in question. There will be a side-by-side comparison of similar properties that have been sold and are for sale. These are called comparable sales or “comps”.
The appraiser will provide an assessment of the performance of the real estate market in the region.
The appraiser may raise concerns in the report about issues that they believe are affecting the value of the property.
There will be posted descriptions of all significant issues such as cracks in a foundation or water entering through the roof.
A home appraisal will include an estimate of the average selling time for other similar homes.
Home valuations will show whether values are up, down or stable.
A description of the area in which the house is located, such as a neighborhood, a country road, or a busy street.
The home appraisal should include the appraiser’s contact details, including licensing information
Are house appraisals necessary?
Real estate appraisals are always a good idea for real estate transactions, and they are necessary for any home sale that requires a mortgage. Appraisers use their experience and training to provide an accurate picture of a home’s value.
Since buyers only want to spend what is necessary, and sellers want to generate as much income as possible from a sale, it makes sense to decide the value of the home before the money changes hands.
Lenders also require appraisals before granting loans to protect themselves. If for some reason the buyer does not repay the loan, the lender wants to know that they can sell the property and get their money back.
Lenders never want to see a low valuation on the purchase of a home that they are loaning money for.
They expect the value of the property to be equal to or greater than what the buyer will pay.
Who is the assessor and how are they hired?
The lender who grants the mortgage engages the appraiser through a third-party company. Lenders and appraisers are no longer permitted to be in direct communication.
Evaluators are licensed after completing licensing courses and internship hours.
The appraiser must be an objective third party who has no financial or other connection with any person involved in the transaction.
The assessed property is called the subject property.
Is the home appraisal information accessible to everyone?
No. The appraisal belongs to the party who orders it – which is not necessarily the party paying for the appraisal. It is possible, although rare, that the homeowner will pay for the appraisal to move the sale forward and become frustrated with not being able to access appraisal information.
If the lender orders the appraisal, no matter who pays for it, then the lender is the controlling party who has access to that information. It is up to the lender to inform the buyer or seller of the home appraisal value in such a situation.
More often than not, however, the buyer pays the appraisal as part of securing a mortgage. The mortgage lender is required to give the buyer a copy of the appraisal report following the law.
The buyer can give the home appraisal to the seller or his agent on request.
Is the home appraisal the last word on the value of the property?
No, the assessment can be contested. If you don’t like the value determined by the appraiser, you have recourse. Your real estate agent can speak with the appraiser and ask them questions about why decisions you disagree with were made. The reviewer may have missed something.
Everyone makes mistakes, even experienced professionals. It is also possible that your perspective on the value of your home differs from that of the appraiser.
While you may think that some aspect of your home has some value, the appraiser may not see it that way. If you are not satisfied with the rating, you can request another one. From time to time, a bad evaluation will be combated. Just make sure you have a good cause, as the most likely outcome is that the new reviewer will produce a similar opinion as to the last one.
In such circumstances, be prepared to present a valid point as to why you think the assessment is wrong. If you’ve hired an exceptional real estate agent, they should be ready to help.
It should be noted, however, that it is difficult to dispute an assessment of a home. Most challenges in an appraisal fail unless the appraiser has made glaring mistakes.
How long does an assessment take?
Once an appraiser is hired to perform a real estate appraisal, it will be scheduled with the seller’s real estate agent. The appraisal itself typically takes around 30 minutes, unless the property is substantial. The assessor will take pictures of the interior and exterior of the house.
They will also sketch the floor plan and take notes on any critical aspects of the property that could influence their assessment. Once the appraiser leaves the property, it will usually take them between a week or two to report the results of their appraisal to the lender.
In times of heavy buying and refinancing, home appraisals can be delayed. The National Association of Realtors has reported that appraisals are responsible for about eighteen percent of all delays in a real estate transaction.
Who should participate in the assessment?
The appraisal should be followed by the appraiser and the seller’s real estate agent. The owner, if possible, should not be at home during the appraisal process. The assessor will be able to do his job much more easily when he can move freely around the house.
A buyer never attends a real estate appraisal.
Why is your neighbor’s house valued more than yours?
Often homeowners are frustrated to find that their homes are not as good as similar homes in their area. They may feel that their homes are nicer than the neighbors; maybe they made additions that they felt should have added more value etc.
If you find yourself in such a situation, try to be patient and consider the possible reasons why the houses were rated differently.
Your neighbor may have more square footage than you think, bigger bathrooms, nicer finishes, or some things that can make a home more valuable. It’s possible that neighbors made improvements that added value to their home when yours didn’t.
If you think the rater made a mistake, you can always ask them why the gap exists.
How often should you get an appraisal of your home?
In most cases, an assessment is considered valid for six months. However, in specific markets, where house prices move rapidly, some lenders may only use an appraisal for about three months.
Also, keep in mind that the appraiser will only consider finished improvements to the home. You cannot ask them to determine the value based on good faith.
Essentially, the value suggested by the appraiser is valid for the day he completed his report. Real estate values are constantly changing. Sometimes an assessment will need to be recertified if it becomes obsolete.
If you’re selling a house and got an appraisal, don’t think the buyer’s lender will use it. They will not be! The lender who holds the mortgage will order their own independent appraisal.
Quite often sellers waste their money on an appraisal, believing it to justify their asking price. Sorry, but it doesn’t work that way. The lender will not even consider looking at an appraisal that has been paid by the seller.
Can I use my city’s property assessment instead of a residential assessment?
No. The assessed value of a house in a city or town is NOT the same as an appraisal of a house. A property appraisal covers a large area and serves a different purpose than appraising a house. An appraisal is accurate, designed to give the most accurate value of a home at the time of appraisal. An assessment aims to get a general idea of what property taxes should be.
Real estate appraisers use their figures as a measuring instrument for municipalities to collect a certain amount of money to cover the expenses of running a town or city. The evaluated worth and the market value are two quite different things. The estimated value is also something different from the estimated value.
Is a Zillow estimate the same as a valuation?
NO! This cannot be stressed enough; a Zillow estimate has nothing to do with a valuation and cannot be used as a substitute. In fact, using a Zillow home value is one of the worst ways to value a property.
Whether you are buying or selling a home, a Zillow Zestimate estimate should be ignored. This is worthless information! There are times when the Zillow value is more than $ 100,000 less than the actual value.
An appraiser will give a much more accurate value report than a Zillow estimate ever could. Never assume that information on Zillow relates to a home appraisal.
Don’t be a DUMMY – using a Zillow value is like a serious car accident waiting to happen!
How much does a home appraisal cost?
Many people ask, “How much does a home appraisal cost?” Valuation costs might vary depending on the complication of the property. A typical property appraisal would be in the range of $ 300 to $ 700, depending on the region of the country.
Home assessment costs also vary from state to state. The buyer is usually the one who will pay for the assessment. The cost of the appraisal will be included in the buyer’s closing costs charged by the lender.
The assessor who will perform the assessment will be trained, licensed, and insured. They are hired by the mortgage company or lender to make sure it is wise to lend the borrower money based on the estimated value.
The appraiser must offer an independent and impartial analysis of the property. No external factor should influence an appraiser’s value judgment. Years ago, the lender could communicate directly with the residential or commercial real estate appraiser of the home. Today, this is no longer the case.
A local mortgage broker or real estate agent should give a more concise estimation of what you can anticipate paying for an appraisal.
How rigid are the home appraisal standards?
It can be tempting to take a real estate appraisal as a guess, but that would be incorrect. There are rigid standards for appraisals that any certified appraiser must adhere to. In other words, an appraiser is not allowed to deviate from accepted standards when performing an appraisal.
There are a lot of things that go into the assessment process that people don’t see. Much of an appraiser’s job is done behind the scenes.
Lenders trust appraisers to protect them from considerable financial risk, so it’s reasonable for regular buyers and sellers to do the same. Reviewers, however, are human, like everyone else.
Every now and then they can make mistakes like you and me. Don’t assume that all an assessor says is the gospel. Home appraisals are opinions of value.
How do I find an appraiser?
What if you sell a house and it is truly unique? Does this sound like you? In this case, where similar properties are difficult to find, it may be wise to hire a professional appraiser.
Getting the correct asking price should be of utmost importance. The appraiser can help you do this on properties that are difficult to appraise. When you don’t know an appraiser, the best source to get a referral will be from a real estate agent. They are constantly dealing with evaluators.
If you’re selling by owner or don’t know a real estate agent, a Google search will help. You can search online for nearby real estate appraisers or nearby real estate appraisers. You should see a few that you can research. Like anything else, ask them for references.
Home Reviews Final Recap
Most real estate agents will stress how critical home pricing is to sell your property. Pricing issues are the number one cause of why homes don’t sell. If you overvalue your property, it will not be assessed. When trying to sell your home, keep these things in mind.
If you are buying a home, the appraisal will go a long way in determining whether you have paid the right amount for the property.
Hope you now know a lot more about home appraisals!
Additional useful tips for selling homes
- Psychological elements affect home values – see what other elements can influence the appraised worth of a home. Home assessments are not black and white. There is a certain level of subjectivity towards them.
- Is your house too expensive? Learn some of the telltale signs that a home is overpriced and it’s unlikely to be priced to sell. Home assessments don’t always go as planned.
- Pros and Cons of a Pre-Sale Appraisal – Find out the pros and cons of getting your home appraised before your property goes on the market. An appraisal can be useful, especially when the property is not usual for the area.
- Feedback helps homeowners sell their property – see why feedback can be a valuable part of selling your home for fair market value. Feedback can help you quickly adjust the asking price for a home when it’s deemed too high.
- Why open houses don’t put a seller’s interests first – learn why an open house is totally unnecessary for selling a home in the digital age.
Use these additional door-to-door sales resources to make smart decisions.