Updated May 15th, 2019
Before you can apply for a mortgage on a home (or refinance the mortgage you already have on the home you currently own!) there is something very important that you need to do first: you need to have your home appraised.
The Ultimate Home Appraisal Checklist
This home appraisal checklist covers everything you need to know about getting your home appraised, from start to finish.
What is a Home Appraisal?
In short, a home appraisal helps you and your listing agent determine what your home is worth in the current housing market. A home's worth is also known as its fair market value.
The lender you are using to underwrite your mortgage needs to know the fair market value of your home. This way, the firm can ensure the amount of money it lends you to pay for the home does not exceed its value.
Because an independent agent conducts your home appraisal, it is fair and impartial. You can be sure that the results you receive are accurate.
Who Conducts a Home Appraisal?
A state-licensed professional home appraiser. This person has absolutely no stake in the value of your home. This means that they do not receive anything from the sale of your home. You only pay the inspector a flat fee for his services.
Because of this, you can be sure that the person is not inflating or deflating the value of your property for personal gain. It is purely objective.
These appraisal agents are also licensed through a state agency that enforces the Uniform Standards of Professional Appraisal Practice, along with many other regulations. You can feel confident trusting your appraisal agent's professional opinion on the value of your home.
One Caveat to the Accuracy of Home Appraisals
Sometimes, an appraiser who works with the same bank on a regular basis might know the proposed loan amount in advance. He could then structure his review to ensure that it goes through.
As mentioned, there are regulations in place to prevent this, especially since 2008. However, if you are still unsure, be sure to ask for references for the appraiser and ask as many questions as you need.
Why Do I Need a Home Appraisal?
The short answer: because your lenders say so!
The long answer: your lenders need to make sure that the amount of money that they are giving you for your mortgage matches the property you would like to purchase. That is, if the home is worth $300,000, the mortgage needs to be exactly that much.
It would not make any sense to approve you for a $350,000 mortgage on a $300,000 house. This would be too risky for the lender as the value of the asset would then not be enough to support the weight of the loan. Lenders will always compare the sales price of the home to its appraised value to ensure this.
What is Evaluated during a Home Appraisal?
There are many factors that go into deciding a home's fair market value.
Here are just a few of the things the appraisal agent will consider about the home itself:
- The overall condition of the home
- The square footage of the home
- The size of the property lot
- The quality of landscaping
- How many bedrooms and bathrooms there are
- The quality of natural light in the home
- The number of fireplaces
- The addition of a swimming pool
- Whether the basement (if included) is finished or unfinished
- The finishing details in the home (such as the material of the countertops and floors)
The appraisal agent will also consider the following things:
- The location of the home
- The views from the home
- The selling price of similar homes
The feature that tends to pull the most weight in home appraisals is the selling price of similar homes, known as comparables or “comps” for short. Your agent will typically look at five or six comps but sometimes can examine up to ten.
Comps are selected from your immediate geographic area. This way, you don't have to adjust the price for the location. You simply adjust the price based on differences in features. For example, a three-bedroom house cannot be directly compared to the four-bedroom next door.
Who Pays for the Home Appraisal?
The person purchasing the home typically pays for the home appraisal. This is because the lender uses it to confirm the amount of the buyer's mortgage.
However, people selling their homes can sometimes also have it appraised to ensure that they list it at a competitive price.
How Much Does a Home Appraisal Typically Cost?
While the exact cost for a home appraisal varies based on where the home is, you can usually budget about $200 to $500 for the service. The buyer's closing costs cover the fee. If you choose to have your home appraised as a seller, you should expect to pay the fee upfront.
How Long Does a Home Appraisal Take?
The entire process should not take more than a week to complete. While the appraiser might only be in your home for a few hours examining it, he will still need to write a report and submit it to your lender. The writing and submitting of the report is typically the longest part of the process.
Can I Increase My Home's Value after the Appraisal?
You can certainly make improvements to your home based on the appraiser's findings, especially since it is a subjective process.
You can do things like fix leaky faucets, repair broken windows, and clean up the undergrowth in your yard to positively impact your home's appraised value.
Something to keep in mind: as you make improvements over the years, be sure to document each of them. You should still note it, whether it's a new appliance or a completely new kitchen.
Depending on your lender, you can sometimes ask for a second appraiser to look at the property if you are unhappy with the work of the first. You can also compile your own list of comparable homes for the first appraiser to examine.
Looking for someone to walk you through the home appraisal process?
Clever is here to help. One of our superstar agents will be with you through every step of the selling process – for one flat fee. Call us today at 1-833-2-CLEVER or fill out our online form to get started.