How Home Appraisals Work

You’ve picked out your dream house, and luckily, you and the seller have come to a mutually beneficial agreement.

You’ve picked out your dream house, and luckily, you and the seller have come to a mutually beneficial agreement.

But the deal doesn’t end here. The property won’t be yours officially until the appraiser weighs in and confirms or complicates the agreement by conducting a home evaluation and assessing the fair value. Lenders often ask for home appraisals to see if the sale price is at least equal to the appraisal value so that if the borrower is unable to pay, the lender can sell the property and recover the amount. Since the process is long and can be complicated to understand, we’ll walk you through it.

Understanding the Appraisal Process

As soon as the buyer and seller have negotiated an agreement, the process begins. As a lender, you’ll arrange for the process and pay for it as well. A real estate appraiser will visit the house and prepare a report of his findings. The report is then given directly to the lender. However, you can always ask for another copy for yourself by putting in a request with the real estate appraiser.

Appraisers begin with an inspection. They inspect the interior and exterior of your home to identify it’s condition and any safety risks. They then take photos of the entire house while evaluating it and note the number of rooms to see if there have been upgrades since the last real estate transactions. As a buyer, you can request to be present, although that is not needed as appraisers typically handle home visits on their own.

Types of loans

Money loan sign

Appraisal visits are different for conventional loans and government loans. For instance, if you’ve applied for an FHA-backed loan, the appraiser making the report will test utilities and appliances to ensure they’re working according to government rules. The same requirement is for people who are opting for VA-loans.

The Appraisal Process in the Pandemic

If you’re considering selling your house during the pandemic, you should know some things have temporarily changed. For instance, the appraiser might only do an exterior inspection instead of an interior one. For an interior inspection, he might only rely on photos or videos to get a clear picture.

Setting a Value

An appraiser looks into the price of comparable homes—those that have the same characteristics as the home in question and are located nearby– sold in the real estate market to determine a fair price. To get this information, the appraiser looks into the Multiple Listing Service, a home listing and sales information database. Even though it’s private, you can still access it and get much of the information for free. In the end, the appraiser decides whether to use a cost-based approach—an estimate which evaluates the value of the home by combining the cost of building a home with the value of the land—or a sales comparison approach.

What You Can Do

If you’re in Lodi and are looking for real estate appraiser services, we suggest you contact us.  You can fill out an order form and we’ll get back to you immediately.

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