How Home Appraisals Work & What You Need To Know

Oct 20, 2022 | Homebuyers, Mortgage

If you’re in the process of buying a home, you’ve probably heard the term “appraisal” thrown around a lot. But what exactly is a home appraisal? Do you need one? How does it work? How much does an appraisal cost? In this blog post, we’ll answer all of those questions and more. 


Home Appraisal 101


You’re probably already familiar with the mortgage approval process. But did you know that your lender will also require a home appraisal before giving you the green light? The purpose of a home appraisal is twofold: first, to establish the property’s fair market value; and second, to ensure that the mortgage amount being lent does not exceed that value. A house appraisal is also often required when refinancing or selling a home. Here’s what you need to know about how home appraisals work and why they’re so important. But first things first…


What Is An Appraisal?


An appraisal is an unbiased estimate of the value of a property, typically performed by a professional appraiser. More specifically, a home appraisal is a process in which a professional appraiser assigns a value to a property. The appraiser will visit the property and examine the home inside and out, taking into consideration the home’s size, age, condition, location, and any recent renovations or additions to come up with an estimate. They will also compare the home to similar properties in the area to come up with a fair market value for the property.


Generally speaking, you will need an appraisal if you’re looking to get a mortgage. Lenders require appraisals for potential home buyers who are taking out a mortgage to assess the risk of lending money.


Preparing For A Home Appraisal The Right Way


While the appraiser is working on determining the value of your home, there are a few things you can do to prepare: 


– Gather any recent appraisals or property valuations you may have.

– Make sure the appraiser has access to the home and all of its features, including any outbuildings or landscaping.

– Collect any documentation you have regarding recent renovations or additions to the property.


How Do Appraisals Work? 


If you’re in the process of buying or selling a home, it’s important to have a clear understanding of how home appraisals work. The appraiser will come to the property and take into account things like the location, square footage, number of bedrooms and bathrooms, any recent renovations or improvements that have been made, and comparable homes in the area that have sold recently. The appraiser will also look at public records to get an idea of the property’s value.


After the appraiser has had a chance to assess the property, they will provide a report that includes an estimate of the property’s fair market value. This number is generally not exact, but it will give you and your lender an idea of how much the property is worth. It’s important to note that the appraised value may be different from the asking price or the sale price of the home. 


Why Do I Need An Appraisal? 


An appraisal protects both the buyer and the lender by making sure that the amount being borrowed is no more than the value of the property. If the appraised value comes in lower than the agreed-upon purchase price, the buyer may be able to renegotiate the price with the seller. 


Home Appraisal Cost


An appraisal is an important step in the home buying process that shouldn’t be overlooked. As explained above, a home appraisal protects both buyers and lenders by ensuring that the amount borrowed is no more than the value of the property. If you’re planning on buying a home, be sure to factor in the cost of an appraisal into your budget. The cost of a home appraisal varies depending on the size and location of the property but typically ranges from $300 to $600. 


How Is Home Value Determined?


There are three main factors that go into determining a home’s value: 


-The sale price of similar homes in the area (known as “comps”)

-The condition of the property 

-The overall desirability of the neighborhood 


A professional appraiser will take all of these factors into account when estimating the value of a home. It’s important to note that an appraisal is different from a home inspection. A home inspection is primarily concerned with the condition of the property, while an appraisal focuses on estimating the fair market value. 


What Happens if My Appraisal Comes in Lower than the Selling Price? 


If your appraisal comes in lower than the selling price, don’t panic! There are a few things you can do: 


-Ask for a “reconsideration of value.” In some cases, the appraiser may have simply made a mistake. If you have evidence that supports your case, it’s possible that the appraiser will revise their opinion. 

-Look for comparable sales in the area. If there are other homes in the neighborhood that have recently sold for more than your appraised value, you can use this information to negotiate with your lender. 

-Make up the difference with cash. If you’re able to pay cash for part or all of the difference, this is usually enough to satisfy most lenders. However, be sure to talk to your lender beforehand to see if this is an option they’re willing to consider. 


Don’t let a low appraisal discourage you from buying your dream home! With a little perseverance (and maybe some extra cash), it’s still possible to make it happen. Just be sure to talk to your lender and real estate agent to figure out the best way to move forward.


Get In Touch With Our Team Today


If you’re thinking about buying or selling a home, our team of experts at Thrive Lending would be more than happy to help. We have years of experience appraising properties in the area and would be happy to answer any questions you may have. Contact us today to get started!

Thrive Lending Group