Understanding Your Home Appraisal

Appraisals are an important part of the mortgage process. They determine the value of your home in the current market and can affect the amount a lender issues you on your loan. Knowing what an appraisal is, how you can prepare, and what you need to consider before getting one are important parts of the mortgage process.

Who conducts an appraisal?

Appraisals are conducted by state-licensed professionals who provide unbiased valuations of homes in the form of detailed reports. Lenders typically contract with appraisers to assess home value for use in structuring loans to potential buyers.

How does an appraisal work?

Appraisers are tasked with forming an opinion about the value of a home given very specific conditions used in the lending process. Appraisers take many factors into consideration, including recent property sales in the area and the home’s features and general conditions.

When an appraiser comes to your home, they will take home measurements, consider room configurations, evaluate the homes’ general condition, and photographically document the findings for inclusion in a final report. Your lender will then use this information to determine the appropriate loan amount to finance your home.

What’s the difference between appraisal value and market value?

Appraisal value is the opinion your appraiser forms about the value of your home based on the information they gathered about it.

Market values are dictated by consumers who drive these assessments based on what they’re willing to pay. A home in a sought after neighborhood with low inventory may command more offers that far exceed the appraiser value.

In terms of loan valuations and the amount you will qualify for, appraisal values outrank market values.

What’s the best way to prepare?

To prepare for the visit, try to ensure the appraiser will have easy access to the exterior of the house. On the inside, make sure that the appraiser can easily access items like furnaces and water heaters. Note that housekeeping is not a factor in an appraisal, just overall condition and maintenance of the home.

An appraiser may note items that are in need of repair. These items will, in some cases, need to be fixed prior to closing.

What’s the difference between an appraisal and a home inspection?

An appraisal is not the same as a home inspection. Although the appraiser documents condition and construction of a home, the appraiser is not performing the function of a home inspector. An inspector evaluates both the structure and mechanical systems of a house, such as plumbing and electrical.

What if there is a square footage discrepancy between my appraisal’s measurements and my tax record?

If there is a discrepancy between the tax record size and an appraiser’s measurements, trust the appraisal. The appraiser is a licensed professional who actually visited the home and measured according to industry guidelines. The Tax District does not perform this sort of measurement and often uses builder’s floor plans or rough exterior dimensions to calculate square footage.

Can I use my own appraiser?

Lenders, credit unions and banks, sellers, and borrowers do not have the ability to select individual appraisers. In accordance with Appraisal Independence Requirements (AIR), lenders do not have direct contact with the appraiser. Appraisers are contracted through a third party company and are assigned by region at random.

 

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