Are you going to be buying or selling a house soon? If so, you may have heard that it’s important to have your home appraised.
What exactly is an appraisal, though? And, why is it an important step in the home buying process?
If you’re feeling confused about the importance of appraisals and how they work, keep reading.
Explained below are seven of the most important things all home buyers and sellers need to know about real estate appraisals.
1. What are Real Estate Appraisals?
A real estate appraisal is a detailed document that provides an unbiased estimate of the fair market value of a home.
The document describes the features that make a home valuable. It also describes the home’s value relative to other properties in the same neighborhood.
All home lenders order appraisals during the mortgage loan process. This provides them with an objective way of assessing the home’s market value. They don’t have to simply rely on the numbers laid out on a site like https://ethos-realestate.com.
As a result, they can ensure that the borrower is asking for an appropriate amount of money. Lenders will not loan a borrower an amount of money higher than the home’s appraised value.
2. What is the Difference Between an Appraisal and an Inspection?
An appraisal focuses on ascertaining a home’s fair market value. There are a lot of factors that go into determining the home’s value, including things like the cost of similar homes nearby.
A home inspection, on the other hand, focuses on identifying issues with the home.
During an appraisal, the appraiser will take note of any obvious flaws with the home. But, the inspection process goes much deeper than that. The inspector will take note of more serious issues like structural damage and flood risks.
3. What’s Included in a Real Estate Appraisal?
An appraisal report includes many specific details about the property in question. It will typically include the following pieces of information:
- A side-by-side comparison of similar properties (both ones that have sold and ones that are for sale)
- An evaluation of how the real estate market is currently performing in the area
- Concerns about issues that the appraiser feels may be harmful to the property’s value
- Flagged descriptions of significant problems (water penetration, foundation cracks, etc.)
- An estimate of the average sales times for similar homes
- Information about whether or not home values are on the rise, stable, or decreasing
- A description of the area where the home is located (specific neighborhood, busy street, country road, etc.)
As you can see, there’s a lot that goes into an appraisal report.
4. Is an Appraisal Necessary?
As mentioned above, a home appraisal is necessary if you need a mortgage. That means that most home buyers are going to need an appraisal.
Even if you are one of the lucky few who can pay cash for their house, an appraisal is still a good idea.
After all, it’s always helpful to have an accurate idea of the value of a home, whether you’re buying or selling. If you’re buying a house, you’ll want to make sure you’re paying a fair amount for it. And, if you’re selling a house, you’ll want to make sure you’re getting a fair amount for it.
5. Who Conducts the Appraisal?
An appraisal is conducted by a highly trained individual. These individuals are licensed and/or certified and have been trained to know how to determine the value of a house as fairly and objectively.
No appraiser is completely free of bias, of course. But, their opinions on the value of a home are based on thorough training, tests, years of on-the-job experience, and continuing education courses.
Appraisers are also required to substantiate their findings. Whatever information is provided in the report, there will also be plenty of information explaining how the appraiser came to the conclusion they did.
An appraiser could lose their license or experience other serious consequences if the issue a deliberately misleading or biased report. So, they have plenty of incentive to deliver a fair and thorough appraisal document.
6. How Can You Boost Your Home Appraisal Value?
If you’re currently in the process of selling your home, you may be wondering if there’s anything you can do to boost its appraisal value.
An appraiser isn’t going to knock money off the valuation of your house for things like dirty dishes or unmade beds. But, there are other, more permanent aspects of your home that could influence their opinion.
If you want to increase the value a bit, you can start by making sure the following factors are addressed as soon as possible:
- Damage like plaster cracks, water stains on the walls, soiled carpeting, or persistent odors
- Exterior damage (overgrown landscaping, broken garage doors, etc.)
There are some other steps you can take to increase the appraisal value, including the following:
- Let the appraiser know about positive neighborhood changes (new roads, new schools, etc.)
- Modernize your home (especially things like the tile, windows, or other permanent fixtures)
Keep in mind, too, that appraisers typically value homes in $500 increments. If there’s a repair that costs more than $500, it might be worth it to go ahead and make it.
7. How Much Does an Appraisal Cost?
Finally, you might be wondering how expensive an appraisal will be. There’s no uniform cost for home appraisals, but the average cost if just over $300. They can cost closer to $500, though.
There are a number of factors that influence the cost of an appraisal, including the following:
- Home square footage
- Property location
- Type of property
- Land square footage
- The company performing the home appraisal
- Extensive damage or needed repairs
If you’re selling your home, don’t worry too much about the cost of the appraisal. The home buyer will eventually cover the cost.
Looking for More Real Estate Advice?
As you can see, real estate appraisals aren’t exactly simple. But, they are important. After all, don’t you want to make sure you’re getting the right price for your house?
You’ve got the home appraisal process down now, but you might be in need of more information regarding the home buying or selling process.
We’ve got tons of other blog posts available that will tell you everything you need to know about buying or selling a home. This article on how to sell your home fast is a great place to start.