What is an Appraisal and what buyers need to know when buying a home?
When you are buying a house in Arizona with a mortgage, your lender will be requesting an appraisal. A real estate appraiser’s only job is to give an unbiased OPINION of value of the subject property. The appraiser will use recent sold properties as well as active and pending homes in the area to help determine the value of the home you choose. Appraisal will helps to guarantee that you aren’t losing money at the time of the purchase. You don’t want to buy a $190,000 home for $200,000. The appraiser also will consider the condition of your home, age, size and so on in determining the value.
The Process of Appraisal
What is the appraisal process? Appraisals are highly subjective in many cases, much more than most people realize. Even though they are many subjective parts to an appraisal, the process itself is pretty straightforward.
The appraiser makes an appointment to visit the subject property. They will take several pictures, both exterior and interior. The appraiser will walk through of the house to get an idea of the overall condition and room count. He/she will look at the age of the home and how it was constructed. The air conditioning/heating, plumbing and wiring will also be quickly checked.
The appraiser will measure the inside of the house so that they can calculate the size (square footage) of the home. They will total up both living space and non-living space. Features, such as number and size of bathrooms and closets will also be a factor in determining the home’s value. The presence or absence of a garage will also determine the value of your home. If the property had upgrade, the appraiser will estimate the “contributory value”.
In addition to visually inspecting the interior of your home and livability issues and size; the appraiser will also look at the outdoor areas and the location in relation to your neighbors. Does it conform to neighboring properties? Is it the nicest home in the neighborhood, or the least desirable? How many homes are for sale and how quickly they are selling in the neighborhood will also have an impact on the home’s worth.
Who pays for the appraisal?
This is a negotiable term of the offer that is often times dictated by the local market. However, in most cases, it is almost always the buyer will have to pay for the appraisal. Many lenders will want appraisal cost prior to closing. However it is not uncommon for a buyer to ask a seller to pay closing costs, which may include appraisal cost. Don’t expect a seller to pay the bill up front; you typically will see a credit at closing. If you back out of the deal as a buyer then you will be responsible for the appraisal cost.
Suggested: What is Closing Cost when buying a home?
Appraisal report
The appraisal report is consisting about 40+ pages. The first page will have a number of headings that identify the subject property and any improvements that have been made to it. If your property is in a specific neighborhood or community, it will be noted on this page. It will also shows the neighborhood characteristic and market trends. It’s important to make sure all informations are correct, as it helps the appraiser identify similar properties to which your property can be compared in order to determine its market value.
The second page of the report is where you will find the number that the property is appraised for. You will see the comparable properties being used to come out with the number. The rest of the report are the calculation and information that support the valuations.
If the appraised value that is less than the contract price, the loan is only going to be approved for the appraisal amount. The seller would need to bring the price down to appraisal amount or the buyer will need to pay the difference in cash. If the seller is not willing to lower the price and buyer can’t come up with the differences, then buyer may cancel the purchase and get the earnest money back, if there was an appraisal contingency.
Also read:
What is a contingency when buying a home?
Common FHA appraisal repairs when buying home with FHA loan
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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