Congratulations! You have pre-approved a construction mortgage, found your dream home, negotiated a pleasant sales price, and made your way through the Home inspection and finally, you have a fully executed sales contract for your new home in hand.
If you have a First time home buyers, you may not understand all of the steps involved in buying a new home. Some of these, like viewing your home and getting a property appraisal, can be stressful. So what should you expect from this next step in the assessment process? And how long does an appraisal take?
Let’s go over some valuation basics to help you understand what is required in one of the final steps of your home purchase.
What is an expert opinion and why do I need it?
An appraisal is an objective estimate of a Value of the house. It is drawn up by a licensed professional real estate appraiser.
You need an expert opinion for several reasons. First of all, an appraisal is primarily for your benefit Mortgage lender. By estimating the market value of your home, the appraisal reassures the lender that they are not borrowing more money on a property than it is actually worth. The appraisal also helps to protect you, it ensures that you are not paying more for the house than you should.
How long does an appraisal take?
The appraiser visits a property for an average of 1-3 hours, but you will probably not get the final valuation report back for a week or two. The time it takes for the appraiser to complete the valuation process depends on the size and complexity of the house. For example, a 10,000 square meter property with a detached carriage house, a horse stable and lots of land in Dallas, TX It takes longer to evaluate than a 1,900-square-foot, three-bedroom, two-bathroom home Seattle, WA.
Remember that after the physical inspection of the property, the appraiser must start looking for comparable properties and eventually prepare the final report. For a typical property, it can take one to two weeks from the first inspection of the property to receiving a final report, depending on how busy the appraisers are and what the Real estate market doing near you.
Who orders the report and when?
Your mortgage company or lender will order the appraisal once all inspections are complete and the inspection repair negotiations (if any) are complete. The House valuation costs typically ranges from $ 300 to $ 400 or more depending on the size and complexity of the property, and the appraisal is paid by the buyer.
What happens with an appraisal?
During a valuation, the appraiser visits the house, where he thoroughly inspects the property from the inside and outside. Unlike the home inspector, who tests all of the systems in the house and recommends any repairs needed, the appraiser is interested in determining the property’s market value compared to similar homes in the area.
The appraiser does this by gathering information necessary to fill out a Uniform housing value appraisal. This form is very detailed and requires the appraiser to measure every room and plot of land the house is on. They also take photos of every room in the house and outside, including the yard.
Among other things, you need to note how old the house is, where it is, how big it is and what the structure is made of. They also determine whether the division of the house works optimally, the number of bedrooms and bathrooms as well as the overall condition of the interior, roof and exterior cladding.
After the appraiser has compiled all the necessary information about your property, he will get information on nearby houses. It is important that these houses are comparable to your property. He will use all of this information to determine a fair market value for the property, complete the appraisal report, and forward the report to your lender for you to be in the Closing process.
And in case you’re wondering, the buyer is usually absent on the day of the valuation. The salesperson may be present during the evaluation, but often his agent steps in and takes his place. In this way, the real estate agent is available to answer any questions that may arise while the appraiser inspects the property.
3 possible results of a house evaluation
When the appraisal is received, the market value determined by the appraiser can be done in three ways.
1. The report is below the agreed purchase price
If the estimated value is below the agreed sales price, you have several options.
- You can request an expert opinion. A Appraisal is when another approved assessor prepares an independent report using the same elements used in a standard assessment. The purpose is for the appraiser to comment on the accuracy and completeness of the initial assessment.
- You can also offer to make up the difference by closing the extra amount. For example, if the negotiated purchase price is $ 225,000 but the estimate is $ 215,000, you will pay an additional $ 10,000 in Closing costs to make up the difference. Something Acquisition costs are tax deductible.
- Another option would be to ask the seller to lower the purchase price by the amount that best suits your financial situation. This includes the seller reducing the purchase price to the estimated value, which means that the seller would deduct $ 10,000 from the agreed purchase price.
- You could try negotiating with the seller. You can increase the amount of cash you close by $ 5,000 and ask the seller to decrease the purchase price by $ 5,000. This would make up the difference between the purchase price and the estimated value of $ 10,000.
- A final option would be for you to go away. If you and the seller cannot agree on a solution to the low appraisal problem, and you do a Assessment contingency, you have the option to withdraw your offer without penalty.
2. The appraisal is higher than the agreed purchase price
If the appraisal of the property is higher than the purchase price, that’s good news. You have just bought a home with equity built in. An example of this would be if the agreed purchase price is $ 225,000 but the estimate is $ 230,000. In this scenario, you would have $ 5,000 worth of equity before making your first payment. And luckily for you the home buyer, the seller cannot ask for more money and the sale of the home is moving forward.
3. Does the report exactly match the agreed purchase price?
Estimated values often correspond to the amount of the agreed purchase price. If this is the case in your purchasing situation, everything is fine and no further negotiations are required.
An appraisal is required when taking out a loan to buy your dream home. And while it can be a rocky part of buying a home at times, remember that once you’ve successfully got through the valuation process, you will start working with one Title company to complete the closure and finally enjoy your new home.