Meet Lindsay Carpenter with Coldwell Banker and team member of C4 Elite Real Estate Team. Today she is discussing appraisals. One of the last hurdles you have to cross when purchasing a home is the appraisal. Often times you and the seller have come to terms on everything and then the appraisal process happens. In a perfect world, the home appraises for the contract price or higher and you have made it over that hurdle. Other times, the value comes in under the contract price and you and your C4 Elite RE Agent must renegotiate with the sellers. Either way, you will want your full time, professional buyer’s agent by your side. Read on to learn more about appraisals.
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A home appraisal is an impartial, professional report on the market value of a home. These reports are done by a third-party. The appraisal is a tool for the lender. Lenders must ensure the amount they are lending for a home is in line with the contract amount. The appraiser must be licensed and cannot be chosen by the home buyer. In order to maintain the integrity of the process, the appraiser comes from an independent management company. These companies work with many different appraisers from all over the state. Additionally, the appraisers are from different sectors of the real estate market. This ensures appraisers have a less direct and equitable influence on the market. Again the appraisal is a tool for the lender, so if you are purchasing a home with cash, an appraisal is optional.
What is Cost of an Appraisal?
If a buyer is financing the purchase of a home, their lender will require an appraisal be done. This ensures the lender knows fair market value of their investment. The average cost of an appraisal in Utah is $525. Even though the lender is ordering the appraisal and it is mandatory, the responsibility to pay for it lies with the buyer. Often, the cost of the appraisal is added to the total mortgage, rather than paying out of pocket at the time of closing. An appraisal usually only takes place after the buyer has written an offer, and the seller has accepted it. In most cases the home has also been through the inspection process. Therefore, a buyer is paying for an appraisal on every home they make an offer on.
The Appraisal Process
There many factors that affect a home’s value. Also, multiple steps are taken by the appraiser in order to determine what that value is. The appraiser will first visit the property and complete a thorough physical inspection. They look at many different parts of the house, ensuring plumbing, electrical, and heating/cooling systems in the home are working properly. Likewise, they also want to ensure there is no significant damage, mold or water damage to the home. After completing the physical portion of the investigation, the appraiser will search for comparable homes within one square mile of the subject property. The appraiser will then determine the home’s value based on its condition, amenities and comparable sales close by.
Appraisers also take into account any remodeling or upgrades to the home. If you are thinking of selling your home and want to know the value, you do not have to hire an appraiser. Call the C4 Elite RE Team for a free home assessment. Furthermore, we can help you determine which upgrades will be best to increase your home’s value. Keep in mind, not all improvements have a 100% money back guarantee.
The Final Appraisal Report
The final appraisal report will document the condition of the house, any upgrades as well as areas that will require repairs before your loan approval. These reports will have a detailed description of the home along with photos and map showing the comparable homes used in calculating your home’s value. Depending on the type of loan the buyer is obtaining, certain issues may need addressing prior to closing. For example, a broken window. A lender is not going to want to provide a loan on a house that has a broken window for safety reasons. If repairs cannot be taken care of before closing, some lenders will allow money to be put in an escrow account to pay at a later date. When funds are in escrow, the lender may require an appraiser to go back out to the house to ensure the repairs are complete and correct.
VA and FHA appraisals are similar in that they have stricter guidelines when it comes to their appraisal process/requirements. Conventional appraisals tend to be a bit more liberal as far as requirements and inspections. The Department of Housing and Urban Development, which oversees the FHA, does have certain guidelines a home must have in order to get loan approval. For example, if damage is found, repairs must be complete before closing. Because of this, FHA/VA is considered stricter than conventional appraisals. In order to qualify for a VA/FHA loan, the home must show the following;
- The roof is in good condition or has at least another two years of life expectancy
- The home is in good livable, condition
- The foundation is not damaged
- The home is accessible from the street
- All stairways have properly installed handrails
- No chipped paint
- Furnace and the water heater are in working status
Overall, FHA/VA simply want to ensure the safety of your new home. Because VA/FHA appraisal inspections require more, they do tend to cost more. A VA/FHA appraisal can cost up to $600 in the state of Utah and may increase another $25-$50 over the coming year.
Know the Value
If you are thinking about selling your home and do not want to pay for it to be appraised, consult a real estate agent. Real estate agents use the same criteria appraisers do when looking at comparable sales (comps), in order to determine the value of a home. Agents also use the same software, which will help provide a very accurate home value.
If the appraised value of the home is less than the contract price, your agent can double check comps and discuss this issue with the listing agent. If the seller does not agree to lower the price and believes the appraiser has made a mistake, your agent can appeal the appraisal assessment. This process can be different depending on your location, so make sure to consult your agent on this matter.
Crossing that last Hurdle
No matter where you appraisal value comes in, our agents at C4 Elite Real Estate Team are here to help you get over all of the hurdles. Purchasing a home is not an easy task…let us make it feel easy and stress free for you. We have you covered.