A home appraisal is an estimation of your home’s value, determined by a professional appraiser (someone licensed by your state on real estate prices).
What’s a home appraisal?
A home appraisal is an estimate of how much a home is worth, as determined by an unbiased third party. They’re required before buying a house and are usually done before you get a loan from your mortgage bank.
Let’s say you found your dream home. After you agreed on a purchase price, you go to the bank to borrow money for the mortgage. Before the bank gives you a loan, they will want to make sure the price you agreed to pay for the house is close enough to its actual worth.
Your bank will invite an ‘appraiser’ to visit the home and inspect both the inside and outside of the house. They’ll look at cracks, dents, and leaks, and record anything that affects the home’s value. They’ll also evaluate the overall condition of the physical structure of the home, as well as local housing market trends, such as your neighborhood and the school district. After taking all of this into account, the appraiser will provide an estimation of how much the house is actually worth.
Btw, home appraisals are also relevant before selling a house to figure out a price estimate, or to appeal property taxes in court.
What happens after the home appraisal?
If the appraisal price is equal to or higher than the price you agreed to pay, you’re on the road to homeownership! That was quick!
However, if the appraisal comes in significantly lower than what you planned to pay for the house, your bank will have some questions.
If this happens, you’ll probably want to speak with the person selling the house and negotiate the property price down.
Keep in mind that you can also appeal your home appraisal or seek a second opinion, but this can also delay the process, and will cost you more (more on that later).
Why do you need an appraisal?
Appraisals help make sure you (and the bank) don’t overpay for a new house. As the borrower, your hope is for the appraisal price to be as close as possible to the amount you planned to pay for the house, which will help avoid any complications that might delay moving in.
We hope this never happens, but if you can’t afford to pay your mortgage, the bank can sell the house to someone else to recover the lost money.
How long does a home appraisal take?
The home appraisal process can take a couple of weeks. The exact schedule depends on the appraiser, but usually, after you ask the bank for a loan, the bank will schedule a home visit by a trusted appraiser for the next week.
The visit itself can take up to a few hours, depending on the size of the house. The final report with the appraised price will only be ready a few days later. You won’t automatically receive a copy of the report, but you can ask the bank for a (free) copy to keep for your own records.
How much does a home appraisal cost?
Home appraisals run between $300 – $400. Generally, the bank will choose the appraiser, and you (the borrower) will have to pay for the cost of the appraisal.