Here's a little attempt to clear up some of the confusion… Any American who has shopped around for a home loan or looked into mortgage refinancing knows that a home appraisal is almost a guaranteed part of the process. When a licensed real estate appraiser looks at a home, he or she is forming an opinion about the property’s value; they rely on experience and expertise in order to make an informed decision.
New rules were put into place in the last several years that place greater restrictions on any attempts made to influence home appraisers. These rules target appraisals associated with high interest mortgage. These regulations are spelled out in the Home Valuation Code of Conduct. The new rules also changed how mortgage brokers and lenders order appraisals for loans of a certain type.
So you know a home appraisal is a part of the whole process, but why is it such a big deal?
Facts About Home Appraisals
- An appraisal is an estimate of value based on recent sale prices for similar properties in the surrounding area as well as the condition of the property. Appraisals will vary from state to state.
- Mortgage lenders will use the appraisal results to figure a loan amount. Homeowners will not be able to secure a loan amount greater than the value of the home.
- Home appraisals are in place to protect the buyer so that he or she does not pay too much for a home. Appraisals also set up safeguards for the seller so that the home is not purchased at too low of a price.
- A home appraisal is not a home inspection. A licensed professional appraiser is not looking to do the job of a home inspector, but rather gathers information about the general condition of the home and its surrounding neighborhood.
How Home Sellers Can Improve an Appraisal
If you are looking to sell your home in the near future, there are some steps you can take to improve your property beforehand. For instance:
- Invest some time and resources in basic home improvements.
- Up your curb appeal with shrubs, flowers, and a nicely mowed lawn.
- Remove clutter and tidy up, inside and out.
- Remodel the kitchen, put in a new wood deck, and add a fresh coat of paint to the outside of your home for an updated look.
- Consider installing new energy-efficient windows throughout.
- Look at the home values in the surrounding area (check with your real estate agent). This can help you determine the range of value your home may be appraised at in the process.
For Buyers and Sellers, Home Appraisals Are Important
When carried out correctly and professionally, home appraisals are meant to protect buyers, sellers, and mortgage lenders in the real estate market. You may encounter frustrations along the way, but that is often part of the journey. For each step along the way, stay informed and do your research so you are always prepared.