Home Appraisals: A Buyer's Guide
Most people buying a Cameron Station home and getting a mortgage to pay for the home, are usually required to get an appraisal on the home before the loan will fund. For anyone who has never gotten an appraisal or who is unfamiliar with the process, it helps to know what to expect. Having this information can make the home buying process easier for everyone.
What Is An Appraisal?
An appraisal is performed by a neutral party to determine the fair market value of a home. Appraisals are most often used in home purchases, but may also be required when a homeowner refinances or takes out a home improvement loan. In the case of buying a home, the appraisal shows that the offer made on a home is at or lower than the appraised value of the home. Banks usually require this certification to ensure that the loan is a good investment.
When Should You Get an Appraisal?
Typically, home buyers and lenders will wait until the home is in escrow before getting a home appraisal. Often, the appraisal will be arranged by the mortgage lender, but the payment for the appraisal often comes out of the home buyer's pocket. Appraisals cost on average between $300 and $400. For large and multi-family properties, the appraisal may cost more. The payment of the appraisal is usually paid after the service is performed or is paid as a part of closing costs when the home closes.
Home buyers do not have to get an appraisal when they're paying in cash, because they're not getting money from a lender. However, an appraisal may still be a smart investment, to ensure that the home being purchased is truly worth the price being paid.
Should You Be There for the Appraisal?
During the appraisal, the appraiser may take measurements and pictures of the house. There is no requirement for either the seller or the buyer to be present during the appraisal. However, in some cases, it's helpful for one or both to be present.
If the buyer is applying for an FHA loan, FHA will require the home to be in a specific condition before the purchase will fund. To ensure that the house is in appropriate condition, the appraiser may make recommendations for repairs during the inspection. These recommendations may not be tied specifically to the value of the home, but are still requirements that would need to be met in order for the loan to fund. If someone is there during the appraisal, the appraiser can point out the problems in person, thus reducing the chances of a misunderstanding.
What Happens if the Home Appraises Below the Proposed Purchase Price?
Normally, homes do appraise at or above the proposed purchase price. However, if the home appraises below the proposed purchase price, the home buyer will have to make up the shortfall in cash, or renegotiate the price of the home with the seller. If neither of these things can happen, then in most cases and according to the the terms of the home purchase agreement, the buyer may be able to back out of the purchase as long as he or she has not waived the appraisal contingency.
How Can You Avoid Having A Problem With the Appraisal During the Home Buying Process?
If you're a home buyer who wants to make an offer on a property, the best way to avoid a problem with the appraisal during the home buying process is to work with an experienced real estate professional. Your real estate professional can steer you away from making an offer that could potentially be higher than the appraisal price of the house. Your real estate agent can help you negotiate a price that is fair and aligned with the current market value of the home.