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The Basics of Appraisals
What are appraisals, and how do they work?
An appraisal is an independent, professional opinion of value. An appraisal helps establish a property's market value - the likely sales price it would bring if offered in an open and competitive real estate market.
There are three main parts to a home appraisal:
- Inspection - A licensed appraiser comes to the property and inspects its size, condition, function and quality
- Comparables - The appraiser researches similar homes in your area and compares recent sales to determine fair market value
- Final Appraisal Report - The appraiser compiles all of the data to issue a final appraisal report
Why do I need an appraisal to get a home loan?
Does Quicken Loans conduct the appraisal?
How much does an appraisal cost?
Most appraisals cost between $200 and $600, but keep in mind that the cost can exceed that range.
The cost of an appraisal varies based on the type and location of the property. Your appraisal may cost more if you have a multiunit property instead of a single-family home, for example, or if you live in a remote area.
Is the cost of the appraisal covered by my deposit?
When does my appraisal expire?
How is my appraiser selected? Can I choose my own appraiser?
What are the qualifications to be an appraiser? Is my appraiser licensed in my state?
Can I contact my appraiser after the appraisal is complete?
Determining Your Home’s Value
How is the value of my home determined?
What are adjustments? How do they affect my appraised value?
Since no two homes are exactly alike, appraisers make adjustments to fine-tune your home’s value according to comparable homes in your area. Say there’s a recently sold home a few blocks from yours with the same number of bedrooms, bathrooms and square footage, but it overlooks a golf course and has a screened-in porch. If your home doesn’t have comparable views and amenities, your appraiser will make adjustments to the price of the comparable home to come up with a value for yours.
The inspection didn’t last very long. How can the appraiser know the value of the home?
What happens if my appraised value is lower than my loan amount?
We usually can’t finance an amount higher than the appraised value of a home. When an appraised value is lower than the agreed-upon sale price of a home, the buyer must make up the difference, or the seller must decrease the price.
If you’re refinancing, a lower-than-expected appraisal value can affect the terms and structure of your loan. You can pay the difference in your closing costs, but if the appraisal is much lower than the loan amount, this may not be an affordable option. Unfortunately, if there isn’t a loan available based on your home’s value, you may have to wait until the values in your neighborhood start to bounce back.
My house is worth half the amount of my next-door neighbor’s house. Why?
I found a few websites that say my value is higher than what my home appraised for. Why?
Online estimates might not have up-to-date information, and nothing can replace a real person doing a live walk-through of your home and seeing firsthand all that it has to offer.
It’s important to know that in the post-bubble lending market, many home loan and appraisal guidelines are government regulated and much stricter. These guidelines are put in place to protect consumers from getting mortgages they can’t afford, or from getting large loans on houses that don’t have value.
How did my value change so much since I had an appraisal a few months ago?
After Your Appraisal
What does it mean that my appraisal is contingent on repairs?
Repairs required during the appraisal process usually involve structural safety concerns, such as steps with no handrail or water intrusion through your foundation. If you’re buying a home, it’s generally the seller’s responsibility to complete the required repairs before closing. If you’re refinancing, you’re responsible for completing all the necessary repairs before you close. That’s why it’s a good idea to complete all your big home improvement projects before starting to refinance your home.