Home appraisals have long been considered an integral part of the home-buying process. The appraisal makes sure that the buyer is paying a fair price, and the appraisal protects the mortgage company against losses.
Still, for all of their benefits, appraisals can feel like an added stress. The buyer needs to spend money on the appraisal, and the seller is worried that the appraisal will come back for less than what they feel the home is worth.
Changes to the Laws on Appraisals
Changes have been made to how appraisals are done. Government agencies have made rules saying that home appraisals are not required for a home that sells for under $400,000. That being said, most major lenders will still require an appraisal, even if the home is worth less than $400,000. However, if the opportunity arises for you to skip the appraisal, is it in your best interests to do so
What Happens During a Home Appraisal?
Before you can determine if a home appraisal is right for you, you should first know what happens during the appraisal process. An appraisal verifies that the home is not being sold for more than it is worth. The appraiser will look at the property, compare it to similar properties in the area and then come up with a fair market value to sell the home.
The buyer is the one who pays for the appraisal. This is because the appraisal protects the buyer. Usually, an appraisal will cost between $400 and $500. However, if the appraisal shows that the home is being sold for an unreasonable price, buyers could end up saving a lot more than the $500 they spent on the appraisal.
How Does an Appraisal Impact Your Mortgage?
Mortgages and appraisals go hand-in-hand. A buyer and a seller might agree on a price for the home. But lenders want more than that. They want an independent source to verify the value of the home. Appraisers are paid when they accurately determine the value of a property.
Once the sale price and the appraised value of the home has been determined, a lender is going to lend based on the lower value. Lenders are always going to be conservative. They want to make sure that buyers are sufficiently invested with their own money in addition to the money they get from the lender.
Appraisals can be time consuming. The National Association of Realtors estimates that 16% of closing delays are connected to appraisals. These delays typically happen when a home is valued less than the sale price. Now, in order to get a loan, the seller and buyer have to sit down and come to an agreement on an adjustment.
Should You Get an Appraisal?
Skipping an appraisal can save you money up front. However, lenders are likely going to require an appraisal. An appraisal can save you thousands of dollars by preventing you from overpaying for a home. An appraisal can help you feel confident about the sale price and make it easier for you to get the funding needed to purchase the home.