What Is a Home Appraisal? | St. Johns Bank
As you move through the mortgage process, you’ll be part of checks meant to protect you and the lender.
In the first category is the home inspection, which isn’t required but we highly recommend it because it gives you a chance you figure out what you’re getting into. In the second group is the property appraisal.
An appraisal is required in almost every home purchase because it provides assurance to the lender that the property is worth what you’re borrowing to purchase it. It’s also another step that helps ensure you aren’t getting in over your head with a home that may not hold the equity potential you think it does.
What’s Involved in a Home Appraisal?
Home appraisals are conducted by professionals with extensive training in the field who are certified by the state. Many of them started their careers as contractors or realtors, or in other construction or real estate careers, so they know homes inside and out.
One of the codes that guides the work of appraisers is the Responsible Valuation Policy from the National Association of REALTORS.
The appraisal is meant to provide an honest, complete, unbiased evaluation of the property, including an estimate of its value. In most cases, the appraisal follows the home inspection and the lender gets the report, but you can request a copy of it.
The appraiser’s work begins with knowing the market, down to the neighborhood and the local stock of the exact type of property you’re trying to purchase. For instance, if you’re looking at a condo in an area dominated by single-family homes, the appraiser may need to look further afield to find a good number of comparable properties that were recently sold. The appraiser must document the comps used in creating the appraised value in his or her report.
The report will also include images and sketches of both the exterior and interior of the home, as well as the surrounding area. There will also be exterior images of the comparable properties.
Unlike a home inspector, the appraiser isn’t looking for the quality of the home, so don’t expect the report to indicate whether the HVAC works or the floors are damaged. However, if the appraiser notices significant issues, particularly ones that are likely to reduce the quality of the structure, he or she may recommend that the lender make the inspection a requirement for the loan.
How Is the Appraisal Report Used?
As we noted, the report is provided directly to the lender and the loan officer makes it part of his or her process for determining whether the lender is safe in making the loan.
If the appraisal estimate comes in lower than the contract price of the property, you may be able to negotiate the purchase down. However, if you aren’t able to get the number down or the difference is significant, it could mean the mortgage is rejected.
The loan officers at St. Johns Bank are dedicated to helping you get the funding you need to land the home of your dreams. If you’re ready to buy or refinance a mortgage, give us a call today!