Several weeks ago, we defined some of the real estate terminology that we, and other Realtors, use throughout the home buying and selling process. We defined the Pre-Approval process in more detail in September and over the next couple of months, we’ll continue to explain some of the terms in greater detail to help first-time buyers and sellers learn the lingo that you’ll hear in the Real Estate transaction process.
This month, we’re digging into the home appraisal to help you understand the valuation process and the role of the Home Appraiser in your home sale or purchase.
The buyer’s lender will typically order a home appraisal to be completed as a condition of financing the home loan. The lender does this to ensure the property is worth enough to cover the cost of the transaction in case of default. Once an appraiser has been selected by the lender, they will look at the local market and the property under contract. They will compare the house to other houses that have sold recently in the area, usually homes that have sold in the last 6-9 months if possible. Appraisers will compare the property to other houses in the neighborhood that are also on the market, especially those under contract. Your appraiser will then make an appointment with the Realtors or the seller to see the property.
Once they arrive, they will note the condition of the home, measure, document the layout, and take photographs, which will all be included in the final appraisal. An appraisal will also contain images of the homes that are used for comparison purposes and notes about the condition of those houses as well. The final appraisal will include a valuation for the house based on the homes that have sold or that are under contract in the area and adjustments for condition, number of bathrooms or bedrooms, basement or garage, and other factors that affect the value of your house.
If you are a seller who is having their home appraised as a condition of your home sale, the best thing you can do to prepare for your appraisal is to ensure that all of the systems in your house are fully functional and that the house is clean and clutter free.
Enjoy the Adventure!