Real Estate

You need to know this about home appraisals

A home appraisal is a critical component of any real estate transaction that involves a mortgage loan. If you are refinancing, you will need an appraisal, if you are selling your home to someone who needs to get a mortgage, he or she will need an appraisal.

What is a home appraisal?

A home appraisal is an opinion on the value of a qualified and impartial third party. Mortgage lenders require an appraisal to be completed when you refinance your mortgage. An appraisal is also completed in a transaction when someone is buying a home to make sure they haven’t overpaid.

Mortgage lenders require an appraisal to ensure that homeowners are not overpaying for a property because if the borrower defaults on the mortgage, the lender will take steps to remove the borrower from the home and sell it to get their money back. it is important so that the house is worth more than the money borrowed. In essence, a home appraisal is a protective attorney for the mortgage lender.

The appraisal process and how appraisal values ​​are determined

These are the main factors that influence your home’s appraised value: current market trends reflected in comparable properties the appraiser selects, home features, square footage, number of rooms / bedrooms and bathrooms, condition, if the property is considered updated, landscaping and exterior condition and parking (garage). The appraiser will do an interior and exterior inspection for the aforementioned factors and will also take note of any deferred maintenance that will be included in the report for the lender.

The appraiser will complete your report on a standard report form that is required by your appraisal jurisdiction. The information that must be included in an appraisal report will not vary much from Canada to the United States.

A standard report includes the following: comparable sales, a street map, building sketch, square footage, photos of the front, rear, and street scene of the home, photos of each comparable property used; a map showing the location of the comparables in relation to the property in question, map of the plot, description of the intended users of the appraisal report, photo and description of each room in the house.

The cost of a residential appraisal report ranges from $ 250 to $ 500, and the owner is usually responsible for paying the appraiser.

What home buyers need to know

When you’re buying a home, an appraisal could sink your business. If you make an offer to buy a home, toward the end of the home buying process, your mortgage lender will require that the home you are buying be appraised. However, if the home appraisal is lower than your purchase offer, the loan will not be provided by the lender, this could also be good for the buyer because you may be able to negotiate a lower purchase price, but very often at the point of sale of the home. appraisal in the buying process there is already a purchase and sale agreement. If a bad appraisal comes between you and your home purchase, seek a second opinion through a second appraisal. Appraisers are not perfect and they may make mistakes.

What Home Sellers Should Know

As a seller, a low appraisal means that you may need to lower the price of your home to sell it. Lenders will not approve loans for more than a home is worth, and waiting for a cash buyer who does not require an appraisal as a condition of completing the transaction is unlikely to lead to a higher sale price. No one wants to overpay for a home, but more importantly, a mortgage lender will not over-lend on the value of a property, so if the appraisal is lower than what your buyer is offering, chances are that Your deal will sink unless you drop the price.

What refinancing homeowners need to know

If you are refinancing your mortgage and want to access some of your home’s equity, the appraised value is very important. Mortgage lenders will have a maximum loan-to-value ratio that they will reach, so the greater the difference between what you owe on your current mortgage and what the home was appraised for, obviously the better. Having a better loan-to-value ratio will also allow you to obtain the lowest possible mortgage rates. Lenders place a lot of emphasis on this relationship, so a high appraised value is very important.

The bottom line

Home appraisal is a very standard process these days in any real estate transaction that involves a mortgage loan, it should be taken seriously, you should know how the appraisal works and what the value is based on, if you feel like your home is Undervalued, you can talk to the appraiser and make your case or get a second opinion.