The process of buying or selling a home is full of strange words that are not part of the everyday vocabulary. One of the most confusing words is “appraisal” and while many people have heard the word before, they don't always know what it means and how it affects them. Let's take a look at the appraisal process and what it means for both buyers and sellers.
First Things First…
Before we talk about what to expect during an appraisal, it's important to understand what an appraisal is and why it's being done.
An appraisal is an expert evaluation of the value of a home for sale in Winter Haven FL done by a certified real estate appraiser. While it is similar in some ways to a home valuation done by a real estate agent to determine the market value and list price, an appraiser looks at many other factors within the community and market as a whole to determine the appraisal value.
If you are buying a home using financing (a mortgage) your lending institution will likely request an appraisal to be done before the loan can be finalized. Likewise if you are selling a home and the buyer is seeking financing, an appraisal is almost guaranteed to be scheduled. Lenders such as mortgage companies and banks insist on appraisals to ensure they are making a sound investment. An appraisal amount in line with or higher than the mortgage amount provided them with the confidence that they will be able to recoup any potential losses from an owner default and subsequent foreclosure.
What To Expect As A Buyer
Once the appraisal has been ordered, it can take two to three weeks to have the final report in hand. This report will be a lengthy document with comps, market analysis of other homes, and lots of numbers. The most important number to look for in this evaluation is the final home value. If this number meets or exceeds your agreed upon sales price you are good to go. If this number is below your sales price, further negotiations will need to take place to come to a new agreement with the seller as lenders will not provide financing above the appraisal amount. The appraisal may also list repairs that must be made in order for the financing to be approved. These repair requests are more likely in certain financing programs like VA or FHA loans.
The most important thing to remember during the appraisal process for the buyer is that the appraisal is there to protect your financial institution and you as well. The valuation provided by the appraiser ensures that you are making a smart investment and not overspending for a particular property.
What To Expect As A Seller
When is the appraisal done? Similar to the home inspection your buyer probably had done, the appraisal will be scheduled through the lender and you will have to provide access to the home at an agreed upon time. Appraisers typically take much less time on the property than a home inspector as they are looking at the features of the home (bedrooms, bathrooms, general condition, etc.) as opposed to discerning the functionality of the home's systems. If the appraisal comes back at a satisfactory value with no repairs, don't expect to see a copy of the evaluation as the document is property of the buyer. Only if there are any issues with the report are you likely to see the appraisal and subsequent valuation.
Keep in mind that this process is an important step for the buyer, and for the real estate market as a whole. Being able to categorically defend the value of a property helps to stabilize the real estate market and ensures that lenders are keeping to a responsible level of lending criteria. These criteria help avoid housing bubbles and skyrocketing homes prices that hurt the economy.
No matter which side you are on, the appraisal can impact your real estate transaction and it's important to know what to expect during the process. While an appraisal doesn’t take place 100% of the time, you are more likely than not to encounter one along the way. Knowing what to expect ahead of time makes the process of buying or selling a home more enjoyable and less stressful for everyone involved.