You might be trying to secure financing to buy a new house and you realize you are missing something. The bank or loan company needs to determine the realistic value of your property. So, you need to get a property appraisal done by a professional appraiser.
While trying to get a good value for your home, you may need to do certain things. You can work with the appraiser, reviewing the exterior and interior improvements that have been done. You may also want to review the scheduled maintenance.
If you can make your home appear elegant, the probability of the appraiser giving a good valuation would be higher. Here we’ve described in brief how the appraisal process works.
The inspection
After you have negotiated the price with the appraiser and signed the contract, the next step is inspection. Your house would be inspected before the date of the appraisal. An inspection would give you an idea of whether or not your home needs further improvements.
During the inspection, the appraiser looks at all the aspects of your house before determining a value. Next, the appraiser needs to determine a value that is the most accurate for your house. If it is in a bad shape, you can back out before the appraisal happens. When compared to inspections, appraisals usually take more time to be arranged.
Your contract would contain several contingency deadlines, which you need to understand. Once you have understood them, you can act accordingly. Your agent might have given you a good market analysis before your offer. Your agent should help you with this as well.
Determining a value
After you negotiate a price, sign the contract, and get the inspection done, the appraiser would determine a value. This is done by taking many things into consideration. Some of the factors are the condition of your home, its living space, age, neighbourhood, and future marketability.
The taxes and selling prices of the comparable homes nearby are also considered. You would have to pay for it directly or have it included in your mortgage. The typical cost of appraisals can go up to $550. According to recent surveys, appraisals average just above $400.
After the appraisal
Once the process of appraisal is complete, it would typically be reviewed by the bank or another appraiser. In case it is a Department of Housing and Urban Development deal, an independent HUD appraiser might be called. Some of the big banks have come up with an alternative in recent times. They use automated valuation models based on statistics to do all the data crunching.
These may involve lesser nuances and details when compared to the personal appraisal reviews. It may happen that the appraisal done would be relatively low compared to the cost of your house. The appraiser might conclude that your house is hazardous or risky. In case of such outcomes, the bank might end the deal, no matter how creditworthy you are.
The deal would be killed even if you were pre-qualified or approved conditionally for a certain mortgage amount. Despite this, there are certain local banks that can give you the loan denied by the big banks. This is particularly true if you are paying 20% down.