Let’s face it, whether you are a seller, a buyer, or the owner of a home, understanding the home appraisal process is necessary to determine the ultimate value of that property. Similarly, it’s important to understand how an appraiser works and what tools they use to compile a home’s estimated value. So, let’s break down some of the basics.
What is a Home Appraisal?
At its most basic level a home appraisal is an unbiased and professional opinion of the value of a specific home. A home appraisal is compiled when there is a mortgage involved in either refinancing, buying, or selling a specific property. Importantly, a home appraisal cannot be compiled by just anyone, according to Investopedia and the Appraisal Institute, “A qualified appraiser should be licensed or certified—as required in all 50 states—and be familiar with the local area. Per federal regulations, the appraiser must be impartial and have no direct or indirect interest in the transaction.”
Your final home appraisal should contain the following:
- A street map with your appraised property and the comparable sales that were used to render the numbers.
- A sketch of the property’s exterior.
- Photographs of the home (front, back, street view).
- A collection of market sales date, public tax records, public land records, and any other information that the appraiser used to determine the value of your home.
What is a Home Appraisal Used for?
While a home appraisal is typically commissioned by the buyer, both buyers and sellers have a vested interest in a home appraisal going smoothly. Investopedia explains, “Lenders want to make sure that homeowners are not over-borrowing for a property because the home serves as collateral for the mortgage. If the borrower should default on the mortgage and go into foreclosure, the lender will sell the home to recoup the money it lent. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.” For this reason, a home appraisal is typically required and commissioned for the lender by the buyer as part of the closing process. In fact, a recent real estate article published by The Balance mentions the following, “One main reason a seller-paid appraisal is likely to be a waste of money for the seller is that the buyer might not trust the appraisal. On top of this, the buyer’s lender most certainly will not accept the seller’s appraisal.”
Can the Appraisal Impact the Sale of a Home?
Simply put, if the home appraisal is at or above the contract price, the closing process can proceed. However, if the home appraisal is below the contract price, it can slow the process or even terminate the sale.
We understand that this process can be stressful for anxious buyers and sellers alike. However, there are a few things that a seller can do to try and mitigate their own concerns. One of those things is working with an agent who will prepare and provide a CMA or Comparable Market Analysis before listing your home. While a CMA is not compiled by a licensed appraiser and doesn’t stand in place of a formal home appraisal, a seasoned agent’s CMA is a very useful tool, and it will help you understand what other homes in your area are listing and selling for. Keep in mind, if you work with IDEAL AGENT®, all of our top agents will prepare a CMA and review it with you to be sure that you have an effective listing price. They will also walk-through your home to review any changes or enhancements that you can make to maximize your sale price.
Are you wondering what specific changes or enhancements you can make to get top dollar at the closing table? Want some extra info on the home appraisal process? Call or chat with us now to get connected with your IDEAL AGENT®!
