When you go to buy a home, your mortgage lender will want to know whether the house you are interested in buying is worth the amount you are willing to spend. They need to check out the house for anything that can devalue or increase the property’s worth. To do this, they require home appraisals for all borrowers.
Here are four common questions—and answers—about home appraisals.
What Is a Home Appraisal?
A property appraisal is an estimate of a property’s value. Property value is based on such factors as location, amenities, structural condition and recent sales of similar local properties.
A home appraiser conducts the process. The appraiser will do a walk-through of the property, noting anything that can alter the home’s value. For example, if the house has a swimming pool but swimming pools aren’t popular in the area, it might not add much value to the property—the pool might even detract from it.
The appraiser will sketch and take photos of the property layout and will look for any safety code violations. If there are any, you may need to fix them before the lender approves the loan.
Who Performs Home Appraisals?
Appraisers are third-party certified or licensed contractors, and the lender usually hires them. They are knowledgeable in real estate and are required to know how to evaluate a property on factors such as neighborhood growth, neighborhood housing trends and market conditions.
To be safe, make sure the appraiser is certified and deals with multiple lenders. If the appraiser only works with one other lender, he may have outside interests—and you may not receive a correct assessment.
Who Pays for Home Appraisals?
The cost of home appraisals depends on the property value, location, and size of your property. They cost a few hundred dollars and typically the buyer pays the fee at closing, although you can opt to pay it up-front. A good faith estimate—also known as a GFE—given to you by the lender will supply a fee for the appraisal.
A “drive-by appraisal” does not pay as much attention to detail as the walk-through, and most lenders will not accept this appraisal. Instead of walking through the home, the appraiser drives by the property and then researches real estate records to come up with an estimate.
These home appraisals are cheaper than traditional ones, but you should ask your lender if they will consider it before you purchase.
How Long Do Home Appraisals Take?
For most loans, a typical property assessment takes a few hours or less, and a “drive-by” assessment will take significantly less time. Turnaround time should be within seven business days, although a busy market can mean a longer wait.
The appraiser will give the final documents—called the appraisal report—to the lender, who is required to show it to the buyer. Make sure you obtain a copy for your own records.
Updated from a previous article by MortgageMatch.com.
Information provided by Realtor.com written by Craig Donofrio