The Reality of Real Estate: Understanding the Home Appraisal Process and Why It’s an Important Step in Purchasing Your First Home
Buying a home is a lengthy process with several steps to complete before being handed the keys to your new adventure. One of the key components of the transaction is the home appraisal. Let’s take a leap towards understanding the home appraisal process and why it’s an important step in purchasing your first home.
What is a home appraisal?
An appraisal is a professional and unbiased assessment of what your home is worth. As a buyer, you want the appraiser to find that the contract price you and the seller have agreed upon is appropriate. The lender wants to know if you’re asking to borrow more money than what the home is worth.
What is factored into the appraisal value?
The appraiser will look into several factors to determine the value of the home. Some of the factors include:
- Recent sales of similar properties
- Current market trends
- Amenities of the home
- Number of bedrooms and bathrooms
- Functionality of floor plan
- Square footage
The appraiser will also have to fill out a report that includes things like:
- A street map with the appraised value and the other home sales data used
- Sketch/photos of the home’s exterior
- Square footage calculation and explanation
- Photos of the front of homes used to compare sales price data
Who orders and pays for the appraisal?
Because the appraisal is meant to protect the lender in the case that the borrower cannot pay back the loan and the home would be sold to get the lender their money back, the lender usually initiates ordering the appraisal. The appraisal cost can vary but is usually a couple of hundred dollars and is a fee that the buyer must bear.
Where does the home appraisal fall in the home buying process?
The home appraisal is usually one of the first steps in the closing process and is done when you’ve entered the under contract stage of the home buying process. If the appraisal comes in at or below the agreed-upon contract price, you can move on to the next step in the process, but if the appraisal is below the price you agreed upon, there may be further steps you need to take.
The appraisal process is an important step, and it can even be a great negotiation tool if the appraiser values the home at a lower price than the agreed-upon contract price, but it can also be a factor that makes a deal fall through. Be prepared for what the appraisal will find, and let your REALTOR® help guide you through the process. If you have questions about what else you should expect when purchasing your first home, contact the David Morris Group at 775-828-3292. We’re happy to share our knowledge and skills to help you become a homeowner.
