Often before you can close on your home, you’ll have to have an appraisal completed by someone appointed by the financial institution that is backing the loan of the home. They want to secure that the value of the home is high enough to justify the loan they are offering to the buyer.
An appraisal is an evaluation of what a property is worth generally done by banks when someone is buying a property. This is not a home inspection and most of the time it is just to confirm the value of a loan so this may mean that it is not the highest possible value of the property. Note that appraisals are opinions and may vary from person to person.
The appraiser will already have researched comparable properties in the area as well as have researched the listing of your property and how much the home is being purchased for. They will take one to two hours to take a look around your home and take measurements to compare those with local filings. They will also make any adjustments for the differentiations between your property and the ones in the area like repairs, custom features, square footage, lot size, etc.
The appraiser is looking for how your home is different from the ones in the area. For instance, does your home have a basement that other homes might not have? This will add or subtract value from the property. They will check the exterior (the roof, siding, foundation, etc.), the safety of the home for residents, square feet, interior features (flooring, conditions of walls, plumbing, electrical, etc.), and other improvements and additions that may increase value.
After the buyer pays for the appraisal (around $500), the appraiser will schedule a time with the seller. The inspection will generally take one or two hours and you generally do not have to be home. If you are not home, make sure all areas of the home are easily accessible as they will not go out of their way to inspect blocked areas. When an appraisal is completed, they will deliver the results to the lender and the buyer. If you are the seller, you may not ever see the value of the home because that could potentially give you leverage to negotiate or back out.
If appraisal comes in below the purchase price, you can challenge the appraisal. If the buyer is using a government loan or they are stuck with a certain lender, you cannot seek another appraisal. You may need to negotiate the price of the property or the buyer will need to match the difference in value.
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