From MasterClass.com, Staff Writer
How Does a Home Appraisal Work? Home appraisals are used to secure a loan from a financial institution for a mortgage or down payment for a home purchase. They are ordered by the same financial institution when you’re refinancing your mortgage. Here is a brief overview of the process of a home appraisal.
OFFER EXTENDED! FREE APPRAISAL UP TO $600 VALUE* when you finance your home through SCE Federal Credit Union. Offer good through September 2021. See details below.
Your appraisal is scheduled. The lender must run an appraisal to determine a fair market value for a property to determine your loan. The applicant must pay for the cost of the appraisal, and the appraiser cannot have a personal connection to the financial institution or the buyer, seller, or owner of the home.
The appraiser visits the home. An appraiser will visit your home and assess its size, location, condition, and added elements of value to determine a fair market value for the house. Your appraisal may take from 20 minutes to two hours.
The appraiser writes a report. Your appraiser will write a full report describing what they found in the home assessment. They will also include data on the value of comparable properties in the area. They will assign a fair market value to the house.
Your loan is granted or denied by the lending institution. If you’re trying to secure a loan to buy a house and the appraisal valuation comes back less than the selling price, the financial institution may deny your loan. Your loan will be granted if the valuation of the house meets the agreed-upon purchase price, or is greater than the purchase price. The lender will compile a closing disclosure that enumerates your down payment, closing costs, or the terms of your mortgage.
What Does an Appraiser Look For?
To appraise a home, the homeowner hires a third-party home appraiser to run an appraisal report of a home by inspecting and assessing the property. A property assessment is similar to a home inspection, but an appraiser will additionally take the sales prices of comparable homes—or comps—into account.
To determine the value of the property against similar homes, an appraiser assesses the following:
Square footage
The physical condition of a home (including appearance, cracks, water damage)
The structural integrity of the home
Quality of landscaping around the home
The home’s number of bedrooms and bathrooms.
Any amenities or renovations like fireplaces, swimming pools, lighting, plumbing, and finishes such as hardwood floors or marble countertops
4 Tips on Preparing for a Home Appraisal
Whether you're a home buyer or a homeowner looking to refinance your mortgage, it's important to prepare for your residential appraisal. Getting a low appraisal can mean having a higher loan-to-value ratio, which can affect the interest rates of your loan.
Review the market. If you’re looking to secure a loan for a new home, you should review recent sales of other homes in the neighborhood of the home you want to buy. This can give you an idea of how your desired property might be appraised.
Examine your desired home's state of repair. Examining the state of repair of your desired home can help you plan ahead and budget for necessary repairs or renovations.
Assess the condition of your house. If you’re a homeowner looking to refinance your mortgage, you want to make sure that your house is in the best condition it can be before the inspection. Make any necessary repairs to your home prior to inspection, paying particular attention to painting and patching walls, checking all light switches and wall outlets work, and repairing roofs and gutters.
Provide documentation. Provide copies of your home's previous appraisals to the home appraiser, and keep documents of all home improvements made and the attached costs.
OFFER EXTENDED! FREE APPRAISAL UP TO $600 VALUE* when you finance your home through SCE Federal Credit Union. Offer good through September 2021. See details below.
*The $600 free appraisal is available to all Credit Union members who apply for a mortgage, submit and close their loan with Community Mortgage Funding, LLC. from 4.1.21 to 9.30.21 and fund within 60 days of application date. Member/ Borrower understands Community Mortgage Funding, LLC’s free appraisal has no cash value. Qualifying members will receive up to a $600 appraisal fee credit applied at closing. Only one appraisal credit may be given per loan transaction for the actual cost of the appraisal, and credit value will not exceed the amount of $600. You may receive multiple Promo Offers from Community Mortgage Funding, LLC. and are eligible for the most beneficial program, but not a combination of any two promos. Member/Borrower is responsible to pay appraisal services cost up front. All loans are subject to credit and loan approval. Promotion parameters are subject to change without notice. SCE FCU NMLS# 456631, CMF NMLS# 266418. Community Mortgage Funding (CMF) is our credit union owned mortgage company. Loans made or arranged pursuant to a California Financing Law license #6039200. NV Exempt Company Registration #4721.