Home Appraisals 101
AnnieMac Education Center
A home appraisal is essentially when an impartial third party assesses the value of a home for either purchase or refinancing. A mortgage lender uses this appraisal to make sure they are not lending too much money to the buyer.
Home Appraisal Basics
Home appraisals play a key role in the home buying process. When purchasing a home, the appraisal is used to confirm whether the purchase price is a true market value.
During a refinance, the appraiser assesses the value based on market conditions and comparable sales. They do not take into consideration the loan amount or value estimate of the borrower or the lender. The appraiser will look for any defects in the home and recommend any repairs that need to be completed prior to loan closing.
The lender needs to ensure that if the buyer backs out that they will get all the money back that they lend out. Appraisals also help a buyer make sure that they are not paying significantly above the market value.
To determine a home’s appraised value, the appraiser will look at a wide range of factors, including
- Home's location
- Size
- Amenities
- Condition
- New features
The appraiser will then use the price of comparable homes to determine the market value of the property.
Appraisal Cost
The cost of an appraisal varies by region and neighborhood. A single-family home will usually range from $300 to $500. Costs will be higher for more complex properties. The appraisal determines the value of the home based on comparable sales in the same neighborhood and will look at similar homes that sold within a six-month period.
In Conclusion
Home appraisals are important to the homebuying process to obtain an accurate opinion of value. Homeowners and lenders have very little control over the appraisal process. The value determined by the home appraiser may seem unreasonable, but they are professionals and know what they are doing.