What Is A Home Appraisal?

Are you going through the home buying process or refinancing? If you are, and you are financing (or refinancing) the home through a lender, you will need to get the property appraised. 


But what is a home appraisal, and why do you need it? Why does the lender require it? And how can you get your home appraised? Our mortgage and title experts at True Concept Title have put together an easy overview explaining what a home appraisal is so you can understand the process when the time comes. 


Finding Fair Market Value 


A home appraisal is an estimate of the fair market value of a home. The appraisal is completed by a licensed or certified appraiser and is based on research of recent sales of comparably nearby homes, an analysis of the property, and the appraiser’s judgment. 


An appraisal is required by a mortgage lender when a buyer needs help financing the home. The lender wants to know what the approximate value of the home is, so if the buyer happens to default on payments in the future, the lender can use the home as collateral to recoup their loss. A lender does not want the loan to be worth more than the property’s value. 


Typically, the homebuyer will pay for the appraisal (roughly $300 to $400), but the lender will set up the appraiser and oversee the process. 


What Does An Appraiser Look For? 


When a home appraiser determines a home’s value, there are many details and factors they consider. Using market research, an appraiser will consider: 


  • Characteristics of the neighborhood/surrounding area
  • Recent sale prices of comparable nearby homes
  • The lot and home size
  • Age of home
  • Condition of home
  • Appliances
  • Amenities (ex. fireplaces, decks, or pool)
  • Home improvements and renovations
  • Interior and exterior materials
  • Local housing market trends 


These listed considerations are a part of the four-step appraisal process. When an appraiser conducts an appraisal, the process performed includes: 


  1. Research the home’s history 
  2. Evaluate the market 
  3. On-site inspection 
  4. Submit a comprehensive report (Uniform Residential Appraisal Report) 


Home Appraisal Vs. Home Inspection 


A home appraisal can sometimes be mistaken for a home inspection. Both are important and required in the homebuying process when the buyer is financing, but they serve two different purposes. 


As we just discussed, a home appraisal is an assessment of home value. It is completed to help the lender gauge the risk of making the loan to the buyer—the bank wants to have collateral that is worth something in case the buyer/borrower defaults on their payments. And while the appraisal does consider the home’s condition as part of the home appraisal analysis, the appraisal does not make recommendations for repairs. 


A home inspection is an evaluation of the home’s condition. An inspector, not an appraiser, will walk through the home from top to bottom, inside and out, checking the home’s structure as well as mechanical and electrical systems, appliances, and plumbing. An inspector will also submit a report, with recommendations for repairs. These repairs will usually need to be completed for insurance purposes before the home can be sold. 


Do I Have to Have a Home Appraisal?  


Unless you are paying cash, you will need to get the property appraised. The lender will have it as a requirement to get a mortgage. They want to make sure the property they are helping you invest in is worth what you’re paying for it. 


If the property doesn’t appraise at the price you offered, you may need to bring more money to the closing table to cover the difference in value. The seller may also be willing to renegotiate the purchase price based on the appraisal value. 


Close With True Concept Title 


A one-stop shop for all your title, loan payoff, and escrow needs nationwide. Our experienced professionals will assist you through the home closing process to make sure your home buying purchase goes smoothly and without any delays. 


Call today at 813-263-7168 to see how True Concept Title, or our local real estate, mortgage, and banking partners can help you! 

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