Home Appraisals: Who Benefits and What is the Cost?

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Home Appraisals and How they Work

When you are refinancing your old mortgage, purchasing a home in Quincy or anywhere else with a mortgage, or even selling your home to someone who is not an all-cash buyer, home appraisal becomes one of the most crucial parts of such a transaction.

It doesn't matter who you are; owner, buyer, or seller, it is very important to understand how the process of appraisal operates and what methods the appraiser uses to come up with the value of the home.

What is a Home Appraisal?

A home appraisal can be defined as an unswayed approximation of the fair market or real value of what a house is worth. During the process of a aquiring a mortgage mortgage, all lenders are supposed to order an appraisal on the subject property. This is done to create an objective means of assessing the market value of a home and make sure that the amount of money that the borrower has requested is appropriate.

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A house appraisal contains a number of things, but key in them are the latest sales information of other properties in the area that are similar, the property's location, the current state of the house, and other insights that affect the value of the property.

The Difference Between Home Appraisal and Home Inspection

Home inspections have been confused with home appraisals for a long time even though they aren't related, an appraiser and an inspector seem to be doing similar duties. Both of them will walk around the property and observe it carefully, although it is the inspector who usually comes first.

Both of them look for different things. While the appraiser would be mainly concerned with the home's value, the inspector would mainly check for defects within the home that might lead cause extra costs for the buyer down the road.

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Who Orders a House Appraisal?

Home appraisals are typically done by professionally trained experts who are either certified or licensed to tell the value of a house objectively, fairly and without any kind favoritism no matter the state or city. Whereas no appraiser is unerring, their opinion of your house's value is mainly informed by several tests they undertake, the rigorous training they undergo, and the number of years of on-the-job experience.

All Real Estate Appraisers must comply with USPAP regulations in accordance with the Financial Institutions Reform, Recovery and Enforcement Act of 1989. State Appraiser Certification and Licensing Boards; Federal, State, and Local Agencies; Appraisal Services; and Appraisal Trade Associations require compliance with USPAP.  - Courtesy of Donaldson Educational Services

Appraisers must come up with an oppionion of value using three differnet methods -- upon completion, they then choose the most appropriate method for the subject property. 

Appraisers and those that they work for (usually the appraisal management companies) are regulated heavily. There can be severe consequences for deliberately giving out biased or misleading reports, and therefore the appraisers strive to remain unbiased and avoid using their personal prejudices and value judgments.

Who Pays For An Appraisal?

In most instances, it is the seller who pays for a house appraisal, but as an extra allure, lenders can at times decide to clear the appraisal payment for the buyer.  There are many things that can affect the cost of an a appraisal, a couple being the type of propety (single family, multi-family, condo) another is the type of loan be secured. 

For instance, when an appraisal is being completed for an FHA mortgage, the appraiser is requried to make sure the home fits FHA standards --- which in turn has additional costs.  The same apprlies for VA loans.  Lastly...the cost of a home appraisal differs based on the location of the property.

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A number of metropolitan locations in California, for instance, cost about the same for an appraisal. A conventional appraisal would cost an amount that ranges from $500 to $525. Because Virginia is very strict with their rules, an appraisal there will cost about $600.

On the other hand, larger  loans might be as high as $750 and a 5000 square foot custom home located on the waterfront might go for about $1,200 to $1,500. This also applies to many exclusive upgrades around this place. For homes in the Greater Boston area including homes in Quincy, the average cost for a single family home appraisal is around $400-$500.

What They Look At

Appraisers are mainly concerned with the current status of what is permanently part of the house or affixed to it. Their evaluations do not cover the furniture or the décor and any other thing that's not attached to the property. The most important things are the physical characteristics of the home such as the square footage, age, the lot size, the number of baths and bedrooms, the view, as well as the location. The observable condition of the house must also be put into consideration.  

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Although the appraiser is required to complete a full valuation using 3 different methods or approaches, the most common process used for residential real estate in Quincy is the Sales Comparison Approach.   Using this method, the appraiser will use simular sold properties - and make adjustments (add or subtract from the comparable) to attempt to bring the comparable property as close to the subject property as possible.  This proecess is based on the Principle of Substition

Can You Challenge It?

Many would want to know the next step to take if they aren't happy with the appraisal report. Once you have carefully gone through the appraisal report and examined the supporting documents, you can decide to challenge it if you feel it's inaccurate.

You can also challenge it if you think it hasn't factored in vital data about the house and other comparable properties. A good number of lenders use a severe check and balance system to review appraisals. This kind of system compares the report to others within the neighborhood.

Should You Opt For A Home Appraisal?

The answer is absolutely yes. In many instances, it will be required by the lender.  When all the things go on perfectly, a house appraisal is just another way of ticking into a loan-closing checklist box. The transaction can be canceled or delayed when the value of appraisal is lower than expected. Despite the kind of scenario you find yourself in during your home selling, buying, or refinancing; a basic knowledge of how the process of appraisal works can help in so many ways.

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When you are purchasing a home in Quincy MA, while under a contract, one of the first steps in the closing procedure would be the appraisal. The transaction would only proceed as planned if the appraisal comes in as at or past the price of contract. However, the process can be delayed or stopped if the appraisal comes in a while below the price of the contract.

As a seller, a low appraisal, if correct, implies that you will have to reduce the price of your house so that you can sell it. It would be impossible for lenders to approve loans for more than a home's worth. On the other hand, holding out for an all-cash buyer who does not need an appraisal to finish the process will rarely give you a higher sales price. Nobody wants to overpay for a house.  

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