House appraisal how does it work

A home appraisal is an estimate of the home's value. It is typically determined by having a licensed appraiser inspect the home and researching the price homes have recently sold for in the area. Prior to buying a home , a mortgage lender will require a home appraisal to ensure the home is worth the amount the seller is asking. Homeowners may also request an appraisal when refinancing their mortgage.

After the appraisal is complete, the mortgage lender will determine how much they will lend for the property. So what do appraisers look for during a home appraisal? When comparing your home to other homes in the area, they will primarily take the size and overall condition of your home into strong consideration when conducting their analysis. If you own a 3-bedroom home in Raleigh, North Carolina, they will compare the amount of similar 3-bedroom homes have sold in the Raleigh area when determining the value of your home.

Before getting too granular, the appraiser will note general details in the home, such as the materials used throughout the home, the condition of the property, and any alarming physical aspects of the property that may impact its habitability. This is one of the first things appraisers look for! If anything seems structurally unsound or unsafe to live in, they will take note.

They will also scan the home's overall upkeep, such as missing door handles, leaking faucets, and other maintenance-related issues. Appraisers will look at the home's location. When conducting an appraisal, the appraiser will consider where the home is located. Location plays a critical part in valuing a home.

They will assess whether or not the home is located on a busy road and if it is in close proximity to owner-occupied homes, renter-occupied homes, or foreclosed properties. In a highly desirable area like Plaza-Midwood or Myers Park which are two of Charlotte's best neighborhoods , homes will be valued far higher than less desirable areas.

Appraisers will also consider the surrounding homes in the neighborhood. Are they primarily single-family homes, apartment buildings, or commercial properties? One thing many people don't account for that appraisers look for is the age of the home. Older homes are sometimes maintained far more and are located in historic districts whereas newer homes may come with problems.

Nonetheless, the age of the home will play a role in the appraisal process. New Construction always is valued higher than homes built a century ago. A home appraiser will take time reviewing the exterior of the home to ensure it is structurally sound. They will look for any signs of water damage or other problems, such as a chimney that is cracked or leaning away from the home which could indicate structural damage along with a lopsided porch or stairs leading up to the home.

If you are aware of your home's roof problems, speak with your real estate agent prior to spending tens of thousands of dollars to repair it. It may be more cost-effective to lower the asking price of your home rather than putting tons of money into installing a brand-new roof. Homeowners also need to emphasize any recent upgrades, which can directly show that the home has maintained or increased its value.

Bob Musinski has written about a variety of financial-related topics — including personal and business loans, credit cards and personal credit — for publications such as U. News and World Report. He has worked as an editor and reporter for multiple publications and an international wire service. You can follow him on twitter bobmusing. Select Region. United States. United Kingdom. Bob Musinski. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.

Not until the appraiser weighs in. What Is a Home Appraisal? A buyer pays the cost of the appraisal, which is usually several hundred dollars. A Look at the Appraisal Process The appraisal takes place as early as possible after the two parties agree on a price, to allow enough time to schedule a property visit and production of the report. A uniform residential appraisal report—which generally resembles this template from Fannie Mae , a government-sponsored company that backs many mortgages—usually relies on these factors: An appraisal inspection.

Home Appraisal Vs. Home Inspection Home appraisals are different from home inspections because they are conducted to determine the value of a home for the benefit of the lender. How to Challenge a Home Appraisal Report If you feel you received a low appraisal and want to challenge the conclusions in the report, you can contact the lender. How a Real Estate Appraisal Can Help a Buyer An appraisal is designed to satisfy a mortgage lender, but it can protect—or even be beneficial to—buyers, too.

Clean up or address problems with the roof and windows or repair water leaks and other issues that could imply there are active problems within the home Conduct basic cleanup inside and outside the house, so it looks as good as possible Home sellers can possibly increase the value of their home appraisal by giving the property appraiser information about notable property improvements, including a new roof, updated siding, recently purchased furnace or air conditioner unit or an addition.

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The Buying Process. Home Ownership Purchasing A Home. Table of Contents Expand. What Is a Home Appraisal? The Appraisal Process. What Homebuyers Need to Know. What Home Sellers Need to Know. Advice for Refinancing Homeowners.

The Bottom Line. Key Takeaways An appraisal is an unbiased professional opinion of the value of a home and is used whenever a mortgage is involved in the buying, refinancing, or selling of that property. A qualified appraiser creates a report based on a visual inspection, using recent sales of similar properties, current market trends, and aspects of the home e.

The borrower usually pays the appraisal fee, which can be several hundred dollars. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Related Articles. Partner Links. This internal review system can catch discrepancies that should be investigated, but any information you can provide to your lender will help. Click here for our infographic showing how the appraisal process works. Loan Amount Calculator. Debt Consolidation Calculator. Affordability Calculator.

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