You’ve found your dream home and now it’s time to cross all your T's and dot all your I's before it’s all your own. And one of the first items on your closing checklist is the home appraisal. So, what exactly is that?
Value Assessment. The home appraisal is essentially a value assessment of the home and property. It is conducted by a certified third party and is used to determine whether the home is priced appropriately. A bank will not refinance a home for more than it is worth, and a potential buyer will not pay more than the recognized value of the home.
During a Home Appraisal. The appraiser conducts a complete visual inspection of the interior and exterior of the home. He or she factors in a variety of things, including the home’s floor plan functionality, condition, location, school district, fixtures, lot size, and more. An upward adjustment is generally made if the home has a deck, a view, or a large yard. The appraiser will also compare the home to several similar homes that were sold within the last six months in the area.
Final Report. The final report must include a street map showing the property and the ones’ compared, photographs of the interior and exterior, an explanation on how the square footage was calculated, market sales data, public land records, and more.
After it is complete, the lender uses the information found to ensure that the property is worth the amount they are investing. This is a safe-guard for the lender as the home acts as collateral for the mortgage. If the buyer defaults on the mortgage and goes into foreclosure, the lender generally sells the home to recover the money borrowed.