It’s exciting when you’ve found the home of your dreams and your offer has been accepted. You’re that much closer to being a proud homeowner, so it’s probably safe to start acting like the deal is done.
Unfortunately, it’s not that easy… Especially if you’re seeking financing to fund the purchase. Lenders aren’t keen on handing out money for properties where the seller’s asking price doesn’t match up with the actual home value.
Home appraisals are a key component of completing a real estate transaction. If this is your first time buying, here’s what you need to know about how home appraisals work so that you can be prepared for what’s to come.
What’s a home appraisal?
Simply put, a home appraisal is an assessment of the property’s true value. This assessment is conducted by an unbiased third-party and they will look at the condition of the property, the location, and market data to determine the home’s value.
How is it different from a home inspection?
A home inspection is where a licensed inspector comes to the property to assess the condition of the home. They are looking for weak points that could make the home unsafe to live in or what needs to be repaired. They look at the overall structural integrity of the home, the home’s systems are in working order, there’s no mold, and more.
A home appraisal, on the other hand, doesn’t get very detailed. They focus on obvious visual defects, like cracked foundations or a roof that’s caving in. They’ll look at the location of the home, crime rates of the neighborhood, school zones, and other comparables that’ve sold recently.
How do appraisals work?
When an appraiser goes to assess a property, there’s no definitive method they must follow – each appraiser is likely to have their own routine when looking at a property. With that said, they will look at the following aspects of the property:
- Square footage of the lot and the interior of the home (they’ll note how many bedrooms and bathrooms there are).
- Areas that could pose a health or safety risk to the home’s occupants.
- Curb appeal and overall appearance of the exterior.
- Permanent additions/upgrades like pools, decks, garages, and basements.
- Overall condition of the home.
- If the home looks like it belongs in the neighborhood (resale purposes).
- Compares this property to similar homes that have sold recently.
Usually the appraisal doesn’t take a long time, but it depends on the size of the home. Generally, appraisals can be completed in a half hour for the average home, but for larger properties, it could take up to a couple of houses. Of course, things like timing, availability, and workload of the local appraisers will have an effect on how long the process can take.
Buying a home is one of the biggest transactions you’ll ever make in your lifetime and it’s bound to leave you on edge. Hopefully, now that you understand how a home appraisal works, that’s one less thing you have to worry about!
