An appraisal is an important part of any home purchase. This is an evaluation, ordered by lenders, that tells them exactly what their money is going towards; because they focus on the actual value of your property, appraisals are different than home inspections. An inspection looks deeply into the condition of a property, but is less concerned with what it is actually worth.
Once
you have a signed contract on a property, and your real estate attorney has
reviewed it, your lender will order an appraisal. As the buyer, you’ll pay for
the appraisal up front, and regardless of the results, the fee is usually
non-refundable.
Once
the appointment has been made, but prior to the actual appraisal, an appraiser
will look online at what similar homes in the area have sold for recently.
These
are called comparable, or comps. Since no two properties are identical, the
appraiser will make individual adjustments to the comps to come up with a value
for the property. Differences in square footage, number of bedrooms, and lot
size form the bases for the appraiser’s adjustments.
After
completion, the appraiser sends his or her report to the lender. It happens
infrequently, but your deal could be in jeopardy because of a low appraisal.
More often, there are items listed on the appraisal that need to be addressed
before the lender will give you money to purchase the property. Typically,
items such as broken water heaters and missing staircase railings will trigger
a hold on your loan.
Sellers
should never know the appraised value. The only thing your seller should know
is whether the buyer side of the transaction found the appraisal acceptable, or
if he or she is being asked to fix any of the items on it.
