House Appraisal Information
If you're in the process of buying and financing a home, you're going to have to get familiar with the appraisal process. An appraisal is a required step associated with just about every mortgage-related loan. A professional appraiser must determine the value of the home before the lender will grant a loan.
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What Is an Appraisal?
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An appraisal is an evaluation by a trained and certified professional who has experience with valuing homes in a specific area. The appraiser follows strict standards and guidelines set by the Appraisal Foundation called the Uniform Standards of Professional Appraisal Practice (USPAP). An appraiser must also pass state-administered exams to get licensed to do business in an area.
Purpose
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When a prospective homeowner wants to buy a house and get a mortgage, he needs an appraisal to secure the loan. The lender needs to verify the home value through the word of an industry professional. If a homeowner plans to refinance his existing home loan, he must also pay for an appraisal to complete the process. A homeowner can also order an appraisal at any time to gauge his home equity, which is the difference between his loan balance and the value of the home.
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What Is an Appraisal Based On?
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The appraiser researches recent closed sales of similar homes in the area (also called "comparables"). Comparables make up the majority of his decision on the value of the home since these are actual prices that buyers paid in the neighborhood. The appraiser also reviews every room of the house in person, in addition to the outdoor area, to evaluate any special features or attributes that could affect the value of the home.
Considerations
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The true market value of a home is the amount that a willing buyer would pay for the home without being pressured by time or other circumstances. An appraiser can only estimate this value based on information he collects from the inspection and comparables. Regardless of what a buyer is willing to pay for the property, a mortgage lender takes the word of the appraiser when evaluating the loan. If the appraisal value comes in lower than the buyer's offer, the seller might have to lower the price of the home. Otherwise, the buyer must come up with additional cash to cover the difference between the asking price and appraised value of the house.
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