April 14, 2022 | Sexton Real Estate Group
No one ever looks forward to getting a home appraisal, but it’s something that almost everyone has to go through at some point. Whether you’re buying or selling a home, an appraisal is a necessary part of the process. However, there are probably some things about home appraisals that you don’t know. Here are five secrets that you may not know about home appraisals.
Deals Are Made Or Broken On The Basis Of Home Appraisals
Home appraisals are often one of the most dreaded and feared aspects of home buying or selling. Why? Because an appraisal is essentially an opinion of value, and that number can make or break a deal.
If you’re selling your home, you obviously want to get top dollar for it. But if the appraisal comes in low, it could scuttle the sale entirely. On the other hand, if you’re buying a home, you don’t want to overpay. A low appraisal could give you some negotiating room to get the price down.
Home Appraisals Can Get Overturned
If you’re in the process of buying or selling a home, you’re probably wondering how home appraisals get overturned. The most common reason for an appraisal to be overturned is because the home doesn’t appraise for the agreed-upon purchase price.
The home must meet minimum standards for safety and habitability in order for it to qualify for a loan from a lender. If the home doesn’t meet these standards, the appraisal may be overturned. Appraisers are required to take into account recent sales of similar homes in the same area when appraising a home. If there have been no recent sales of comparable homes, the appraisal may be overturned.
In some cases, an appraisal may be overturned if the home is located in an area that is declining in value.
Consider Appraisal Contingency
If you’re in the process of buying or selling a home, it’s important to be aware of the appraisal contingency. What is appraisal contingency? It’s a clause in a home purchase contract that protects the buyer (and sometimes the seller) if the home appraises for less than the agreed upon purchase price.
While most people are aware of this type of contingency, there are still many homebuyers and sellers who don’t fully understand how it works or what implications it could have on their transaction.
The Appraisal Is for the Lender, Not the Buyer
One of the most common questions home buyers have is why the home appraisal is for the lender and not the buyer. After all, isn’t it the home buyer who is paying for the appraisal? The answer has to do with risk and collateral.
When a home buyer takes out a mortgage loan, they are borrowing money from the lender. The home is used as collateral for the loan. This means that if the borrower defaults on the loan, the lender can foreclose on the home and sell it to recoup their losses.
The home appraisal protects the lender’s investment by ensuring that the home is worth at least as much as they are lending. If the appraised value comes in lower than the loan amount, the borrower will need to either make up the difference in cash or the lender may require that the price of the home be lowered.
Big Home Projects Do Not Guarantee A Higher Appraisal
You may have just put in a new kitchen or finished the basement, but unfortunately, these big projects don’t always guarantee a higher appraisal value. This is because appraisers often use sales of comparable homes in the area to determine value, and these homes may not have had the same upgrades.
The home appraiser is looking for quality, not quantity. Sure, that new addition might have added a lot of square footage to your home, but if it wasn’t done well, it could actually drag down the value of your home. Appraisers are looking for features that add value and function to a home, not just features that are expensive.
A home appraisal is just one person’s opinion of value and should be used as guidance, not gospel. There are a number of factors that can influence an appraiser’s opinion, such as the home’s condition, the location, recent comparable sales in the area, the economy, and more.
An appraiser’s job is to provide a value estimate based on all of these factors, but that doesn’t mean that their estimate will be perfect. In fact, it’s quite common for home appraisals to come in lower than expected. If you’re counting on your home appraisal to give you an accurate estimate of your home
While appraisers aren’t looking to nitpick your home, they will note any major flaws that they see. This could include anything from a cracked foundation to water damage in the basement.
Just because an appraiser says your home is worth a certain amount doesn’t mean that’s what it will actually sell for. There are a number of factors that can affect your home’s value, including the current market conditions and even the time of year.
The home appraisal is an important part of the home buying process, but it’s not always clear what goes into them or how they work. We hope this article has helped to demystify the appraisal for you and that you now have a better understanding of what to expect. If you have any questions about appraisals or would like more information on how we can help you get your home ready for sale, please don’t hesitate to call us today. We would be happy to answer any of your questions and help make the home buying process as smooth as possible for you.
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