An appraisal on a property intends to determine the fair market value. It’s one of the final steps in the home-buying process that happens once the seller has accepted your offer and you have started the work with a lender. A financial institution will not lend money without an appraisal. The appraisal value of a home can make or break a sale, leaving this part of the real estate process a critical step.
The home appraisal is different from the home inspection even though both an appraiser and an inspector will walk inside, outside, and around the property to check everything with a fine toothcomb. The appraiser is finding the value of the home and the inspector is looking for problems or defects with it.
During an appraisal of a home, the appraiser will look at the state of repair, the features, the square footage, as well as the number of bedrooms and bathrooms. Give a list of repairs and improvements made such as a new roof, water heater, air conditioning, etc. The owner of the home should bring forward anything and everything that will help the appraiser decide the general market value.
The appraiser will research all the comparables (“comps”) in the area with features similar to the home. Also provided should be whether the values of homes are on the rise, decreasing, or stable. If there are any concerns that he feels will harm the property’s value, it will be noted. Additionally, he will flag any bigger problems he may see in the foundation, the roof, or any noticeable water leaks in ceilings or floors.
Again, an appraisal can make or break a sale of the home so it’s a stressful time. If the appraisal comes back higher or lower than the sale price, there will need to be more negotiating. If the seller isn’t happy with the outcome, a good realtor will discuss with the appraiser why certain decisions were made. With the help of a realtor, the seller can put together a valid argument as to why the appraisal is not correct.
Appraisals are valid for six months unless the home is in certain markets where homes are selling fast and prices continually change. At this point, lenders usually like an appraisal every three months. The real estate market changes from year to year and even month to month.
The Bottom Line: The process of home appraisal and final valuation might seem beyond your control. But, you can take charge by making some improvements to your home to up the appraisal outcome. Ask your realtor to help you understand what the appraiser will look for so that you can update and make sure your home is ready for show!