The Home Appraisal Process & Timeline
May 31, 2022
A bunch of jargon is thrown around once you start considering buying a home. Offers, inspections, appraisals, mortgages, down payments, interest rates… if you’re feeling a little lost, we get it. We want to help make the whole prospect of getting the keys to your next home easier, and that’s why we build simplicity into our home building process. But if you’re in the early stages of figuring out what’s what, we put together this resource on home appraisals so that you understand what the home appraisal process looks like, how you’ll go about getting a home appraisal, and what’s on the home appraisal checklist when it’s your home’s turn to be appraised.
What is a Home Appraisal?
The home appraisal is an evaluation conducted by a professional aimed at determining the fair market value of the home. This figure is used to determine the property taxes the buyer will pay going forward and is of particular significance to the lender (whoever has agreed to finance the mortgage) because the value of the home is used as collateral to secure the full amount of the mortgage. As such, the lender will typically place the order to start the home appraisal process, and the buyer is responsible for any fees incurred, which vary, but are usually several hundred dollars in Virginia.
What is the Difference Between a Home Inspection & Home Appraisal?
A home inspection is conducted largely in the buyer’s interest and is much more thorough, focusing on defects or issues with the home (rather than the home’s value). The home inspector will put a home through the paces, testing outlets, running the HVAC unit, examining plumbing and appliances, and walking the roof. At the completion of a home inspection, the buyer should have an accurate idea of the repairs a home needs. By contrast, getting a home appraisal is about looking at the housing market in which the home was purchased and the overall condition of the home. Big defects or obvious damages will be taken into consideration, but the home appraisal process isn’t intended to find specific issues with the home. Rather, when getting a home appraisal, the appraiser takes the big picture into account to determine what the value of the home is based on their home appraisal checklist.
What is Considered as Part of the Home Appraisal Checklist?
The home appraisal checklist is conducted by a licensed or certified home appraiser who is familiar with the area in which the home is purchased, and it’s required by law that they be impartial to the sale or purchase of the home. When getting a home appraisal, the appraiser will consider recent sales of similar properties in the area, as proof of the current housing market. The home appraisal checklist includes the number of bedrooms and bathrooms, the home’s amenities, total square footage, and the year the home was built. The appraisal will also factor in the interior and exterior condition of the home and will be adjusted to reflect needed repairs or maintenance.
Why is Home Appraisal Important to a Homebuyer?
If you’re securing a mortgage to pay for your home, getting a home appraisal is important because it determines what lenders are willing to lend. The bank that’s financing the mortgage loan cares about what a home is actually worth, not what the home was listed for or what the bidding wars elevated the selling price to. In fact, many lenders require that you include an appraisal contingency in your offer, outlining that you’ll be getting a home appraisal and that the offer is contingent on the home appraising at or above the offer price. The home appraisal process protects both the buyer and the lender in the instance that the home isn’t valued at the accepted offer price.
What Happens if a Home Doesn't Appraise at the Purchase Price?
Unfortunately, this can happen, especially in hot housing markets with low inventory. If the home appraisal process reflects that the home is not valued for what you offered, there are a few options. The most common course of action is for the buyer to make up the difference out of pocket, but this can of course be challenging for buyers with tight budgets. A house not appraising for the offer price can also allow for renegotiation with the seller. Or, if you have an appraisal contingency in your offer on a resale home, it not appraising high enough can also allow you to back out of the sale altogether.
What is Included in an Appraisal Report?
Usually, certified appraisers use the same form, the Uniform Residential Appraisal Report from Fannie Mae, intended for the home appraisal process for single-family homes. The report outlines the basics of the interior and the exterior of the home, including the square footage calculation. The home appraisal checklist will discuss the neighborhood and will show a street map of the appraised home, a sketch of the home, and its relative location to the comparable sales used to validate the findings. The report will include photos of the exterior of the home being appraised, and exterior photographs of the comparable properties referenced. The home appraisal checklist will also include a variety of data points including market sales, public land records, and public tax records that all work to inform the final appraisal figure.
If owning a home is on your to-do list, a home appraisal is likely in your future. Working with an experienced Realtor or one of our New Home Sales Consultants can help you know exactly what to expect during the home appraisal process.