Whether you’re buying a home, selling, or looking to refinance, knowing the value of real estate is crucial in the home buying and selling process.
Simply put, a home or real estate appraisal is an unbiased assessment of a property’s value. This assessment is conducted by a licensed professional. The appraiser assesses the property and determines its value based on many factors including square footage, condition, and most importantly, the price of similar properties that have sold in the area.
An appraisal protects the homebuyer from potentially overpaying for a home. Real estate appraisals are also required by the lender. They want to make sure the home is worth what the listing or negotiated price is, as the home serves as collateral to the mortgage loan.
As a critical component in the mortgage lending process, the home assessment may change the course of the lending deal depending on the calculated worth estimate.
What’s the difference between a home appraisal and home inspection?
Although they both take place before settlement, a home appraisal and home inspection are two different things. A home appraisal is an assessment of the home’s worth and is done by a third-party licensed appraiser.
The home inspection is an in-depth look into the home to determine any mechanical, electrical, HVAC, plumbing, and functional issues. Home inspections let the buyer know if the house is safe and up-to-code. Inspections are conducted by a third-party licensed inspector.
Home appraisals and home inspections can make or break a deal – either if the value is not in alignment with the lending price, or if the home requires extensive repairs.
What do home appraisers look for?
Licensed home appraisers look at many factors when determining a home’s value. This includes:
- Recent home sales in the area – real estate comparables or “comps”
- Amenities and features
- Home improvements
- Condition of the property
- The local real estate market
- The home’s location
- Any potential health and safety hazards
There may be additional factors the appraiser will consider depending on the type of loan. VA and Federal Housing Administration (FHA) loans, for example, have additional loan requirements and therefore different appraisal requirements.
How much does a home appraisal cost?
A home appraisal for a single-family home can cost an average of $500. Factors that can influence the cost of the appraisal include size and complexity of the home, location, market conditions, etc.
Who pays for the appraisal?
While the lender usually sets up the appraisal, the cost of the service falls on the borrower. Fees can be paid upfront or factored into the final closing costs.
How long does a home appraisal take?
A typical home appraisal can take anywhere from a few days to about 10 days. While the physical, in-person assessment may only take 30 minutes to an hour, the following report is the most time-consuming factor in the process. That’s why it is important to have the real estate appraisal scheduled accordingly to ensure the transaction will be approved before closing.
Any delays in the home appraisal can delay closing. Home appraisals will usually be good for 120 days or 4 months after the report is complete.
Does the homeowner attend the appraisal?
In a real estate transaction, the homeowner does not attend the appraisal. Usually, the seller’s real estate agent will join the appraiser.
Home appraisals are conducted solely by the licensed home appraiser so they can assess the home without interruption from the homeowner or buyer. Since this is an unbiased and professional service, the appraiser needs to work on the report independently.
Do appraisals affect property taxes?
No, an appraisal does not affect your property taxes. Appraisal reports are not sent to appraisal districts, and third party appraisers do not work for governing entities.
Can I use a property tax assessment in place of an appraisal?
No, property tax assessments and real estate appraisals are two separate reports used for different purposes. Tax assessments are a valuation of your home to determine local and state taxes. Appraisals are for the mortgage lender to approve your loan amount. A property tax assessment is performed using mass-appraisal standards and cannot be used when an appraisal is required.
While information regarding real estate appraisals can seem daunting, it’s a comfort to have professionals on your side when buying, selling, or refinancing a home. Licensed appraisers, realtors, and your lender will work with you to ensure a smooth process from offer to appraisal to signing.
Looking for more information regarding home buying and selling, property taxes, and other information? Visit our blog for more resources and helpful tips from North Texas Property Tax Services (NTPTS).