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Fact CheckedHome appraisals cost $300 to $400 and are usually required for all mortgage transactions, including purchases and refinances. They give lenders an unbiased estimate of your property's fair market value. Appraisals are different from home inspections because they look at the home's features, upgrades, and recent sales of similar homes in your area to figure out how much it is worth on the market. It's important to understand this process because a low appraisal value can stop financing, force price negotiations, or make buyers bring more money to closing.
Appraisals and inspections are very different things. Appraisals find out the fair market value for lenders, while inspections check the physical condition of the home and find out what repairs need to be made.Buyers pay $300 to $400 for appraisals at closing. The price depends on where the appraisal is done. In cities and towns with fewer appraisers, the fees are higher. The lender orders the appraisal to make sure it is fair and unbiased.Appraisal reports are good for 120 to 180 days. Conventional, FHA, and USDA loans accept appraisals for up to 120 days, while VA loans accept them for up to 180 days. The actual inspection only takes 30 to 45 minutes.Low appraisals make it hard to get financing, which may mean having to renegotiate the price, come up with more cash for the down payment, or lose the deal. However, buyers can challenge appraisals if they think they missed comparable properties or if there are errors.Sellers can raise the value of their home by getting it ready for an appraisal by cleaning it, making any necessary repairs (especially safety issues), improving the curb appeal with landscaping, and giving appraisers detailed lists of all the improvements and upgrades they've made.Understanding how home appraisals work may not be on everyone's list of burning questions, but if you're buying, selling, or refinancing a house, it should be at the top of your mind. There's a whole host of questions that come with this process: what to expect, costs involved, and what's in the appraisal report. We're here to demystify the home appraisal process and address common queries to ensure your mortgage process goes smoothly.
Home appraisal allows an unbiased appraiser to determine the fair market value for a home, distinct from its tax value. It considers specific interior and exterior aspects, real estate market trends, and recent sales in the area. Appraisals are essential in buyer-seller transactions (purchase-money mortgages) and nearly always required for mortgage refinancing.
Mortgage lenders use appraisals to ensure they don't lend more than the home's worth, using the appraised value and loan-to-value ratios to determine lending amounts. An appraisal benefits buyers by confirming the home's value matches the purchase price, offering negotiation leverage. For sellers, it helps in pricing the home accurately.
In cash transactions without lenders, buyers may still opt for an independent appraisal to verify the home's value.
No, these are distinct processes with different focuses. A home inspection assesses a home's condition for necessary repairs before purchase, while an appraisal determines its market value for lenders.
Appraisal costs typically range from $300 to $400, varying by location. Urban areas or rural regions with fewer appraisers may incur higher fees. The lender orders the appraisal and then the buyer pays for it, typically at closing.
Appraisals occur during loan closing, soon after the purchase contract or at a refinance lender's request. The appraisal process takes a few weeks, with the actual inspection lasting about 30-45 minutes. Conventional, FHA, and USDA loans consider appraisals valid for up to 120 days; VA loans extend to 180 days.
Under Fannie Mae's Appraisal Independence Requirements (AIR), appraisals must be unbiased and ordered following specific guidelines. Buyers cannot select their appraiser but need a certified, neutral third-party licensed in the home's state. Buyers must be present during the appraisal to grant interior access.
Lenders may offer hybrid, desktop, or drive-by appraisals, leveraging technology and safety measures, especially during COVID-19. These are considered remote appraisals.
Hybrid appraisals use third-party materials like home inspection photos or videos. Desktop appraisals rely on online property records and local market data. Drive-by appraisals, allowed by FHA and VA for refinances, assess the exterior supplemented by online research.
Appraisers evaluate the home's overall condition, lot size, significant upgrades, and various factors like:
Post-appraisal completion, appraisers generate a formal report detailing the home's fair market value. Buyers receive a free copy at least three days before loan closure, with lenders receiving a duplicate. The report includes property condition details, maps, photographs, market valuation data, and comparisons with similar homes. New construction appraisals consider existing area homes and building plans.
A low appraisal value, below the purchase price, may prompt buyer-seller negotiation adjustments. Buyers can challenge an appraisal, but success typically hinges on missing comparable properties or appraisal inaccuracies. Low appraisals affect refinancing terms, influencing loan-to-value ratios and potentially necessitating Private Mortgage Insurance (PMI).
Tax assessed values and appraised values serve different purposes, with tax values used for property taxation based on local government assessment methods. Discrepancies can impact monthly payments, especially with new construction lacking tax history. Appraisals can support appeals against tax assessments.
The appraisal process can differ depending on whether you're the buyer, the seller, or you're refinancing. If you're the home buyer, it's wise to keep an eye on local home values and to connect with a qualified real estate agent who can guide you through the process. As the seller or refinancer, here are some tips to prepare:
