The Ins & Outs of Home Appraisals

25 May / The Ins & Outs of Home Appraisals

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A guide to the home appraisal process.

A home inspection is critical in the home buying and selling processes. Whether you’re the buyer or seller, a home appraisal is critical – and often required – as part of your home ownership journey. Whether you’re trying to determine a fair market value to list your home or trying to obtain financing for your home purchase, understanding the ins and outs of the home appraisal process is critical.

The Basics

A home appraisal is the unbiased opinion of an appraiser, which tells you the fair market value of a home that you’re hoping to buy, sell, or refinance. This is a critical step for homeowners who are unsure about the value of their home, or potential buyers who are hoping to obtain financing. All lenders require a home appraisal prior to approving financing to ensure that the borrower isn’t trying to over-finance their home purchase.

The Process

Because the home inspector is most commonly protecting the interests of the lender, the lender will typically provide an inspector that they have vetted. This appraiser will be knowledgeable about current market trends and about “comps” (or comparable properties) in the surrounding markets. Other key factors are also taken into account, like the number of bedrooms, amenities, floor plan, functionality, and square footage.

Once the appraiser completes his or her inspection, he or she will provide a copy of the final report to all interested parties, along with reports on any factors that negatively influence the value. This report will include observations and conclusions about the property’s value. It must also include a street map indicated the appraised home’s location and comp sales, a building sketch, photos of the exterior of the home, market sales data, and an explanation of how square footage was calculated.

Interests: Seller & Buyer

If you’re buying a new home, an appraisal is one of the critical steps in the closing process. Your goal is to have the appraisal come in at or below the contract price so that your financing can proceed as planned. If your inspection comes in below the contract price, your financing may be derailed and you will have to go back to the negotiation process.

As a seller, the most important aspect of your appraisal is accuracy. You will want your home to come in right around the amount financed by the buyer. If the value is too high, the buyer’s financing could fall through, but too low and you will have to lower the price to sell.

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