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The Home Appraisal Process

THE HOME APPRAISAL PROCESS WHAT YOU NEED TO KNOW AS THE BUYER SOLD APPRAISAL BASICS What is an appraisal? An unbiased professional opinion of a home's value The median home value in the U.S. is $180,100. Median is the midpoint of all home values in the country. Why is it necessary? Lenders want to make sure the Mortgage lenders require an appraisal on your home before they'll provide a loan. home's value matches the loan amount because the home serves as a collateral for the mortgage. The appraisal helps the bank protect itself from a foreclosure. How it works: A lender will only approve a loan for a property that appraises for the full sales The buyer can make up the difference with cash, if they APPROVED wish to do so. price or more. A qualified appraiser should be: Familiar with the local area Licensed or Impartial certified The property being appraised is called the subject property. Appraisals are based on: Comparables: Property Size: A larger property allows homeowners room to expand. The average home size has nearly doubled since the 1950s. Appraisers compare the square footage of the property and number of rooms to other More bedrooms and bathrooms can increase value. In 2014. homeowners purchased houses with a median of 3 bedrooms and 2 full bathrooms. properties of a similar size and configuration that have recently sold in the same area. Comparables are often referred to as "comps" Exterior Condition: Materials used and any damages such as leaks or cracks as well as any defects from when the house was built. A.) Foundation D.) Windows F.) Garage B.) Paint E.) Doors G.) Driveway C.) Roof Additional exterior furnishings such as: Patios Verandas Decks Pools Fencing C) 田田 Interior Condition: G.) All other mechanical equipment J.) Signs of mold and mildew on walls, ceilings, and floor A.) Materials used, construction defects, and any other interior damage or defects B.) Plumbing C.) Electrical wiring D.) Heat and air conditioning E.) Ventilators H.) Carpet K.) Kitchen appliances (only fixed appliances affect value) L.) Lighting units F.) Water heater I.) Tile U.S. Spending on Home Improvements Remodeling Spending Per Home $1,250 or less $1,250- $1,600 $1,500- more than n/a $2,000 $2,000 This data reflects owner-occupied homes in 2014. The Appraisal Report Should Include: Uniform Residential Appraisal Report O A street map showing the appraised property and comparable sales used O An exterior building sketch O An explanation of how the square footage was calculated O Photographs of the home's front, back, and street scene O Front exterior photos of each comparable property used O Market sales data O Public land records O Public tax records WHAT HAPPENS IF IT'S HIGHER OR LOWER THAN THE CONTRACT PRICE? Lower: You and the seller must abide by the contract that was already negotiated. If the contract is contingent on the appraisal, you can withdraw your offer and have your earnest money deposit returned. If you prefer to buy the home anyway or waive the appraisal contingency to make your offer more attractive to the sellers, you can: Challenge the appraisal with documentation Pay for a second appraisal, which may or may not be higher Renegotiate the contract if the seller is willing from your realtor Pay the difference on your own Ask the seller to finance the gap between the appraisal and the sales price Higher: You'll have more equity in the property than you thought. If you're paying s300,000 for a home but it was appraised for $330,000, you gain $30,000 in equity. WHAT HOMEBUYERS NEED TO KNOW The appraisal is one of the first steps in the closing process. If the appraisal is at or above the contract price: • The transaction proceeds as planned. If the appraisal comes in below the contract price: • It can delay or derail the transaction. Though it's not a common occurrence, appraisers can make mistakes or have imperfect information Review the appraisal. Buyers have the option to have a second appraisal. APPRAISAL MYTHS AND TRUTHS Myth: An appraisal is the same as a home inspection. Truth: An appraisal does not serve the same purpose as an inspection. A home inspector determines the condition of the home and its major components. An appraiser forms an opinion of value in the appraisal process. Myth: Appraisers use a formula, such as a specific price per square foot, to figure out the value of a home. Truth: Appraisers make a detailed analysis of all factors pertaining to the value of a home including: Location Condition Size Proximity to facilities Recent sale prices of comparable properties The appraised value of a property will be different if the appraisal is conducted for the buyer versus the seller. Myth: Truth: The appraiser has no vested interest in the outcome of the appraisal, which should be objective. Myth: Assessed value should be the same as market value. While most states consider assessed value as the approximate Truth: estimated market value, this often is not the case. Sometimes the assessor is unaware of certain improvements, like interior remodeling or if properties in the vicinity haven't been reassessed for a while. Since people pay for appraisals when applying for loans to purchase or refinance real estate, they own the appraisal. myth: Truth: The appraisal is legally owned by the lender unless the lender "releases its interest" in the document. When homes in a given area rise by a particular percentage in a robust economy, the value of individual properties in that area will appreciate by the same percentage. Myth: Truth: Value appreciation must be determined on an individual basis, no matter the state of the economy. The home appraisal process is an important step of the loan-closing checklist. Knowing how the appraisal process works-and your options as the buyer-can only work in your favor. • • • • • • • • Brought to you by: In partnership with: OSOURCE TITLE GHERGICH&Co. SOLD OBJECT SUBJECT BE

The Home Appraisal Process

shared by Ghergich on May 17
Spring is upon us, which means the housing market is busy! Learn all about the home appraisal process and what it means for the value of your home.


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