Whether you’re contemplating selling your home or simply intrigued by its current worth, a house appraisal serves as an excellent tool for gaining insights into your local real estate market.
It offers a comprehensive overview of recent sales in your neighborhood, providing a snapshot of the market’s conditions at that specific moment. This appraisal is pivotal in unraveling your actual net value.
Engaging in a property appraisal will address several essential questions you may have concerning your property.
In this article, we’ll delve into the home appraisal process, who pays for it, and how much it can cost.
What Is a Home Appraisal or House Appraisal?
According to ROCKET Mortgage, a home appraisal, often referred to as a house appraisal, is an unbiased evaluation of a property’s market value.A loan appraisal is typically ordered by the mortgage company or bank to ensure that the property’s appraised value aligns with the requested loan amount. An appraisal order is crucial in the loan approval process.
If the home is being paid for in cash, without a mortgage, then an appraisal isn’t required.
Home-Appraisal Process
A mortgage company appraisal process involves a licensed appraiser visiting the property to assess its condition, features, and overall value. The goal is to provide an accurate valuation of the property.
1. Ordering the House Appraisal
The home appraisal process typically begins with the mortgage company or bank. When you apply for a mortgage loan, whether it’s for a new home purchase or a refinance, the lender will order an appraisal to determine the property’s value. They engage a state-licensed appraiser for this purpose.
If you want a home appraisal for your own personal reasons, you can do the hiring yourself. Once you narrow down to a handful of appraisers, you can authenticate their status on the Federal Appraisal Subcommittee website.
2. Scheduling the House Appraisal
Once the appraisal order is placed, the appraiser schedules a time and date to visit the property.
It’s important to note that the appraiser is an independent, unbiased professional who has no vested interest in the transaction’s outcome.
3. Home Inspection
On the scheduled date, the appraiser visits the property to perform a thorough inspection of the home’s interior and exterior. During this visit, the appraiser assesses various aspects of the property, including its size, condition, features, and any recent renovations or improvements. They also take note of the property’s location and its proximity to schools, amenities, and transportation.
The appraiser typically takes photos throughout the house and homeowners may even be present. While buyers can request to be present, this is somewhat uncommon.
4. Comparative Market Analysis
To determine the home’s value, the appraiser performs a comparative market analysis (CMA). This involves examining recent sales of similar properties (comparables) in the neighborhood. The appraiser considers factors such as the comparables’ sale prices, size, location, and condition to arrive at an estimated value for the subject home.
5. Appraisal Report
Following the property inspection and CMA, the appraiser compiles their findings into a comprehensive appraisal report. This report includes a detailed description of the property, an analysis of the comparables used, and the appraiser’s final estimate of the property’s value.
6. Final Valuation
The appraiser’s final valuation determines whether the property’s appraised value aligns with the requested loan amount.
If the appraised value is lower than the sale price or the loan amount, it can have dire implications for the transaction, potentially requiring renegotiation or additional down payment from the buyer.
7. Submission to Lender
The completed appraisal report is submitted to the lender who ordered it.
The lender reviews the report to ensure it meets their requirements and aligns with the loan application.
8. Loan Approval
If the property’s appraised value meets or exceeds the requested loan amount, the lender proceeds with the loan-approval process.
If not, the lender may require adjustments to the loan terms, such as a larger down payment from the buyer or a reduction in the sale price.
9. Closing
Assuming the appraisal is satisfactory, the real estate transaction proceeds to closing.
During this phase, all necessary paperwork is finalized, and the home officially changes ownership.
How Much Is Appraisal Fee? What Does a Home Appraisal Cost?
The cost of a home appraisal, often referred to as the mortgage appraisal fee, varies based on several factors. Factors include the property’s location, size, complexity, and the appraiser’s expertise.
According to Rocket Mortgage, a home appraisal, on average, can cost anywhere from $600 to $2,000. If the property has more than one unit or is a luxury home, the costs could be higher than average.
Usually, the appraiser’s examination focuses on the following:
- Property and home condition: The appraiser assesses the condition of both the property and the home, thoroughly examining both the interior and exterior.
- Home layout and features: The appraisal includes an evaluation of the home’s layout and its various features.
- Home updates: Any updates or renovations to the home are taken into consideration.
- Overall construction quality: The appraiser gauges the overall quality of construction.
- Home square-footage estimate: An estimation of the home’s square footage, known as the gross living area, is provided. Garages and unfinished basements are appraised separately.
- Permanent fixtures: The appraisal accounts for permanent fixtures, such as in-ground pools, distinguishing them from above-ground pools.
Hopefully, now you know how much it costs for a home appraisal. It’s essential to budget for this expense when considering a home purchase or refinance.
Who Pays for Home Appraisal?
When buying a house who pays for the appraisal?
The party responsible for paying the home appraisal fee depends on the nature of the transaction.
In a purchase scenario, the buyer/borrower typically covers the appraisal cost regardless of whether the loan closes.
However, if the homeowner is in a rush to sell the property and close the deal, they may sweeten the deal by offering to cover the appraisal fee.
In a refinance, the lender often bears this expense as they require an updated appraisal to assess the property’s current value.
Who Orders the Appraisal
When buying a house, who pays for the appraisal?
In most cases, the mortgage company or bank orders the home appraisal.
They schedule the appraisal with a licensed appraiser to ensure an unbiased and accurate assessment of the property’s value. This is to ensure that the property is worth the amount the potential buyer is seeking to borrow from the bank.
The home appraisal process usually takes anywhere from a few days to a few weeks, depending on the property’s size and complexity.
Homebuyers and homeowners looking to refinance do not typically order the appraisal themselves.
How to Schedule an Appraisal
Scheduling an appraisal involves contacting a qualified appraiser, discussing the purpose, setting an appointment, and preparing the property.
Things to Know Before Scheduling
Before initiating the property appraisal process, there are crucial factors to consider, including property value, comparable sales, property improvements, and property records such as floor plans and records of past appraisals.
When Is Appraisal Fee Paid?
The appraisal fee is typically paid upfront by the responsible party.
For buyers, this expense is often included in their closing costs, while lenders may roll the cost into the overall loan amount in a refinance scenario.
Purchase Appraisal and Refinance Appraisal: Differences
While the fundamental appraisal process remains the same, there are some differences between a purchase appraisal and a refinance appraisal. In a purchase, the appraisal aims to determine if the property’s value aligns with the sale price. In a refinance, it helps assess the property’s current value to determine loan eligibility.
FAQs
1. What is appraisal in mortgage?
An appraisal in a mortgage is the process of evaluating a property’s value to ensure it meets the lender’s requirements for the requested loan amount.
2. What is appraisal fee?
The appraisal fee is the cost associated with conducting a home appraisal, which can range from $600 to $2,000, depending on various factors.
3. Where to get an appraisal for a house?
Home appraisals are typically scheduled and conducted by the mortgage company or bank involved in the real estate transaction.
House Appraisal Process and Cost: Key Takeaways
Understanding the house appraisal process and the associated costs is essential for both homebuyers and homeowners looking to refinance.
Whether purchasing a new home or refinancing your existing one, the home appraisal process plays a crucial role in determining the property’s value and loan eligibility.
Be prepared for the appraisal fee, which can vary based on location and property characteristics. By knowing who pays for the appraisal, you can navigate the process with confidence.
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