You have probably heard of a home appraisal. What is it? How can you prepare? Why does it matter? We are here to cover the basics.
What is a Home Appraisal?
An appraisal is completed by a professional appraiser who will inspect the size, condition, function and quality of a house. An appraiser will also take into account similar houses in the area and recent sales in the past six months to determine a fair market value. Appraisals establish a given property’s market value through a different evaluation than inspections.
In short, appraisals tell you how much a home is worth, and an inspection is a visual evaluation of the home’s condition, including its major systems such as electrical and mechanical.
On average, an appraisal costs about $300 – $400, a fee which is usually required by most mortgage companies. If you are buying a home, the cost for the appraisal is usually included in the closing costs.
There are a few things sellers can do to prepare for an appraisal. Take into consideration the following:
Do your research.
Find out what similar houses are selling for in your neighborhood. How does your potential home differ?
Spruce up your place.
Address the obvious problems; replace that cracked tile or fix a loose board. Appraisers can tell if a home hasn’t been maintained. It’s always best to maintain your home continually and over time.
Make a great first impression – it’s important!
Curb appeal sets the tone for your house. Mow the grass, trim the limbs and put some effort into the landscaping.
Make a list of home improvements or upgrades, including the amount spent.
Have you replaced the HVAC units, siding, new roof or gutters? These are things that will add value to your home.
Appraisals are important because they protect all parties involved. When you apply for a mortgage, lenders require an appraiser as an objective third party to determine value. Your lender will assign an appraiser.
If you’re selling a home, it will help you come up with a reasonable listing price. In some cases, the home appraisal can come in low. If this happens, as a seller, you are able to dispute the appraisal. You can do this by pointing out missing comparisons, highlighting improvements made to your property or seeking a second opinion.
According to the National Association of Realtors, the five most common appraisal mistakes include vague neighborhood boundaries, incorrect lot dimensions, low estimations of home improvement costs and incorrect floor plan dimensions.