Back HomeHomebuyers! Here’s what appraisers look for during an appraisal
So, you’ve found the home of your dreams.
To get to this point, you did everything by the book: saved up for your down payment, maintained an ideal credit score, obtained a preapproval from a lender indicating the amount you can borrow, sought out a home within the stated budget, and made an offer on a property that the seller accepted.
What, then, is the point of having your lender send out a home appraiser to check out the property you are about to buy?
Let’s find out by answering a few FAQs:
Q: What is a home appraisal and how is it different from a home inspection?
A : A home appraisal is the unbiased assessment of a licensed professional tasked to determine the true and fair market value of a piece of property. A home inspection, on the other hand, tells buyers what areas of the home need to be repaired.
Q: Why is a home appraisal important?
A : For lenders – Usually conducted at their behest, a home appraisal ensures that the loan amount a borrower applies for matches the appraised value of the property. The process protects the lender from financing an overpriced home. For example, lenders will not approve a $250,000 home loan for a piece of property that has an appraised value of only $200,000.
For buyers – A home appraisal gives you a true picture of what the property is worth outside of the list price or market value (which is based on how much buyers are willing to pay for a piece of property). If the appraised value is higher than the offer the seller accepted, then that’s good news for the buyer. If the appraised value is lower than the offer or list price, then the buyer can ask the seller to reduce the price to the appraised value. The appraised value also indicates how much the buyer will pay in property taxes and gives them an idea of improvements they’ll make to add to the home’s equity.
For sellers – If the seller hires an appraiser before the home is put on the market, the result of the appraisal can justify the selling price or become an opportunity to improve the property.
Q: What do appraisers look for in a piece of property?
A: To determine true market value, an appraiser looks at the age and physical condition of the property, the size and location of the house and lot, and assesses it against comparable sold properties in the area.
An appraiser will also analyze the following:
- The exterior of the property: square footage, curb appeal, structural integrity, architectural design, signs of water damage, uneven or lopsided features (such as chimneys, porches, and the like), garage and driveway, roofing materials, outdoor amenities, and the presence of ADUs (additional dwelling units) such as detached studio apartments, a backyard guest home, or a guest room above the garage.
- The interior of the property: the heating and air conditioning, the walls and floors, rooms, appliances, the presence of a basement and an attic, an in-ground pool, signs of infestation, safety features, home improvements, and upgrades
- Neighborhood and nearby areas: the home’s access to amenities, proximity and vulnerability to hazards, offsite improvements, zoning, and other conditions in the area that may affect the value of a home
Q: How do home appraisers rate the condition of the home?
A: In the past, home appraisers were limited to rating the property as good, fair, and poor. Today, the Federal National Mortgage Association or Fannie Mae has set property condition appraisal ratings from C1 to C6.
Among the descriptions Fannie Mae provided for each home appraisal rating are the following:
- C1 – New home with no physical depreciation
- C2 – New or recently renovated home and similar in condition to new construction
- C3 – Well-maintained structure
- C4 – Adequate maintenance with minimal repairs needed ,
- C5 – Functional utility and overall livability are diminished but the dwelling remains usable as a residence
- C6 – Severe deficiencies that affect the safety, soundness, or structural integrity of the home
Q: How long does it take to complete a home appraisal report?
A: Typically, it takes from one to two weeks for the home appraiser to file their report. However, the appraiser is not required to furnish the buyer with a copy of their findings because it was the lender who ordered the appraisal. However, a buyer can access the report if they pay for it, request the lender for a copy, or work with the lender to close the deal.
To find the home of your dreams and learn more about the home buying process, contact Berkshire Hathaway HomeServices Caliber Realty. We are a full-service real estate brokerage firm specializing in Texas real estate listings, including homes for sale in College Station, TX.
To schedule a consultation, call Berkshire Hathaway HomeServices Caliber Realty at 979.694.8844 or contact us here.
