If you’ve ever applied for a mortgage or home equity loan, bought or sold a house, refinanced a home or sold off assets after a loss or divorce, it is very likely that you are already familiar with home appraisals.
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Home appraisals are reports conducted by professional assessors to determine the value of a property. It’s easy to think of them as mere estimates based on opinion, but there is a distinct process involved and key considerations that every home appraisal should address.
No matter the size or type of property or whether you are an experienced home trader or are a first-time buyer or seller, it’s important to understand what home appraisals entail and how much they cost.
What Is a Home Appraisal?
An appraisal is performed by a professional in order to determine the worth of your home before you put it on the market. As Forbes noted, a lender will request one, but the buyer has to pay the cost, which varies depending on who conducts it.
Types of Home Appraisals
According to The Balance, home appraisals are required for all home loans and are backed by the federal government through the Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). But there are private companies who do less costly home appraisals. There will be a difference in cost depending on who you get to assess your home, whether through a conventional banking route or through a private company.
Why Do I Need a Home Appraisal?
Appraisals benefit the buyer, seller and lender. It is true that a house is worth however much someone is willing to spend, but an accurate value of a property is required because, as a seller, you don’t want to underestimate your price and get fleeced, and, as a buyer, you don’t want to overpay for something that isn’t worth its sale price.
However, as HomeGuide pointed out, the home appraisal’s main importance is to establish terms of a mortgage loan. They are required before you can get approved for a loan, and they give a good estimate of how much to lend to a loan applicant.
How Do Home Appraisals Work?
An appraiser will normally start with a comparable sales approach, looking at other homes in the area using recent sales, proximity and similarity as guides. According to Money Crashers, a home on the same street block will give a better indication of value “than one six streets over.”
But there are loads of other factors that an appraiser will use to evaluate a home, including square footage, number of bedrooms, condition, lot size, light and views, quality of landscaping, fireplaces, pools or finished basement features, fixtures and character.
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Home Appraisal vs. Home Inspection
While a home appraisal focuses on the value of a home in relation to neighborhood, house size, area comparables and renovations added to the home, home inspections dig deeper into the nuts and bolts of the house to determine condition of foundation and wall structure and potential warning signs (like mold). Both are recommended, if not required, by lenders.
How Much Does a Home Appraisal Cost?
Unless you look out your kitchen window and see movie stars or pro athletes, you should expect to pay $300-$450 for a home appraisal. But that cost can go up depending on a number of factors.
An appraiser will look at both the property and the surrounding neighborhood to make their value assessment. Mobile or manufactured homes might cost you less to assess, while a larger house or lot with a wealth of upgrades in a rural area lacking in comparable houses might cost you more. As Forbes noted, a multi-family home could cost you up to $600 to get appraised, and a high-end home in an affluent location might run the home appraisal up to $800.
HomeGuide broke down appraisal costs according to type of sale and lender. Through a bank, an appraisal should cost the consensus price of $300-$450, but a private appraisal (often used to gauge value before listing, mainly for estate sales and divorce settlements) would cost around $250-$425.
Mobile home appraisals cost approximately $300-$425 ($450-$775 though a VA lender), $300-$425 for a condo appraisal ($450-$725 for a VA appraisal), $400-$500 for a multi-family home appraisal ($550-$850 for a VA appraisal) and $350-$500 for a land assessment.
Appraisals are usually included with other closing costs and are normally scheduled by the lender. But that doesn’t mean you shouldn’t do your research and ask questions. Lenders are going to go with home appraisers that are cheap and familiar. You are buying or selling one of your life’s biggest assets — understanding the home appraisal process and knowing what it will cost is fundamental to you selling or purchasing a home.
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