For sellers, they might find themselves asking, “What's my home worth?”. This can inform them of their listing price.
Buyers also want to know what a home is worth before buying it, which is why an appraisal is important. Although it’s not theirs at the time of appraisal, if all goes well, it will be soon.
Here’s the rundown of the home buying process and what the appraisers do.
A Breakdown of the Homebuying Process
Deciding the right home for you is a big step, and it’s a complex project involving many tasks. Most buyers get connected to an agent to help them, and a majority of agent relationships begin through word-of-mouth referrals.
From there, the steps tend to follow this list:
1. Work with a Lender
Get connected to a lender and begin to talk about how much you can afford, what loan programs will work best for you, and get a pre-approval letter showing you are able to purchase. This pre-approval letter is perhaps the most important thing you get upfront so potential sellers know you are ready, willing, and able to purchase.
2. Decide on a Location For Your New Home
Sit down with your agent again and decide where you will be looking for in your ideal home. It’s important to remember that homebuying is a process of elimination, not selection. There are limited homes on the market, and your criteria will determine your options.
3. Choose “The One”
After looking at several candidates, the right home will come to the forefront. If you’re stuck between a couple options, make a pros and cons list. This will help you identify what sacrifices you’ll need to make and what factors are deal breakers.
4. Write Up the Offer
Your agent writes the offer and includes factors like sales price, closing costs paid by the seller, home warranties, inspections to be done (septic, termite, etc.) by the seller. Once you’ve signed off on the offer, you submit to the buyer’s agent.
5. Go Under Contract
There is likely some negotiation back and forth, but hopefully, you all agree and a contract becomes binding. That date is critical to the process because all activities are counted from ‘binding agreement date’.
6. Due Diligence Begins
Many contracts have a due diligence period to allow for a home inspection, further investigations in to concerns raised by the home inspector, and any other factors that might affect your willingness to purchase the house. Once that period is complete (typical is 7-10 days), it’s time to get the loan moving along.
7. Pay for the Appraiser
One of the next things you’ll do is pay for the appraisal. This is a commitment to work with a particular lender. They will ask a lot of detailed information from you, and this is when the appraisal is ordered.
8. The Lender Chooses an Appraiser
Typically, the lender has a pool of appraisers. They are usually organized by Appraisal Management Companies (AMC). This is the organization that developed during the Great Recession to make sure appraisers are kept at ‘arm's length’ and are truly independent and unbiased in the process. The AMC is given the order for the appraisal and an appraiser from the pool picks up the request.
What Does an Appraiser Do?
Once the appraiser has the request in hand, they can begin work. They review the contract, market comparables, and the property itself.
By this time, it’s probably been 10-15 days from the binding agreement date. It’s important to know how many days you have to get the appraisal done. FHA does not have a time limit on getting it done (as of this writing), but most other loan products do.
Once the appraiser completes the site visit and has reviewed comparable homes and market conditions, the report will be sent back to the lender by the AMC. Within a couple of days, the loan officer will notify everyone that it’s ready, and whether the value is at least equal to the sales price. If all goes well, buyers will know the details within 20-25 days from the binding agreement date.
Of course, this is just an overview, and there is more to the process than what’s been outlined here. You should lean into your agent for guidance. The professional agents at Sweet Group Realty are ready to help you get into your dream home. Trust us and the process, and you’ll be in your new home before you know it. Contact us today to speak to an agent.