What You Need To Know About Home Valuation Appraisals
A home valuation appraisal is an assessment of the value of a home by a professional appraiser. It is typically required when purchasing or refinancing a home and is used to assess the property's fair market value. Understanding what goes into an appraisal can help you make an informed decision about buying a home. Here's what you need to know.
How Does a Home Valuation Appraisal Work?
A home valuation appraisal includes a detailed analysis of the condition and features of the property, including:
- Square footage
- Age
- Quality of construction
- Number of bedrooms and bathrooms
- Overall condition
- Upgrades or improvements that have been made
In addition to the size and condition of your property, also referred to as the subject property, the appraiser will also consider recent sales prices for nearby homes with similar characteristics. For example, if your home is a 1,500-square-foot, one-story home with three bedrooms and one bathroom, the appraisal will look for other 1,500-square-foot homes with the same features that have recently been sold in the surrounding area. Comparing that home to a six-bedroom home with 4,500 square feet does not make sense.
When Do You Need a Home Valuation Appraisal?
A home valuation appraisal is typically required if you are taking out a loan to purchase a new home, but there are other reasons to get a home valuation appraisal, including:
- Refinance. If you are refinancing an existing mortgage or getting a home equity loan, the bank will send an appraisal to re-assess the value of your home.
- Cash sale. Even if you are paying cash for your new property, an appraisal is still wise to ensure that you are not overpaying for the property.
- Insurance. With home values fluctuating wildly over the past few years, many homeowners are seeking a home valuation appraisal for their homeowner's insurance policy. They want to make sure they have enough coverage for the current value.
- Probate court. When going through the probate court process, you will most likely need an appraisal to determine the property's value.
Who Pays for A Home Valuation Appraisal?
It is customary for buyers to pay for appraisals when they purchase their homes. Their bank or lender is the party requiring one, and the cost of the home valuation appraisal is typically rolled into the closing costs of the loan. The same is true if you decide to refinance. It's always important to read through all documents carefully before signing anything so that you understand who is responsible for paying for any fees and third-party services.
Home valuation appraisals are necessary to know the fair market value of a property. An appraisal can help you make more informed decisions throughout your real estate transaction process.
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