Shopping for a home can be an exciting adventure, the beginning of a new chapter in your life. But, sometimes, that chapter never gets written because the appraisal gets in the way. The appraisal is a key component in the home buying process because it determines whether or not you’ll get the loan amount you need to buy the home. So here’s what you need to know about the appraisal process in Lufkin.
What the Appraisal Really Is
An appraisal is simply a report of a property’s value and is usually prepared for the lender. A trained, licensed appraiser compiles and submits this report according to industry specifications. Typically, the appraisal is done after a seller accepts a buyer’s offer.
The buyer’s mortgage lender uses the appraisal to determine whether the property is, in fact, worth the loan amount based on criteria such as condition, features, and location. Lenders are unwilling to lend more than a certain percentage of property’s worth. That way, if the buyer defaults on the loan, the lender can sell the house and get their money back.
So if, in the appraisal process, the home’s value is judged by the appraiser to be equal to or greater than the sale price, you are very likely to get the loan amount you need. But if it appraises for less than the offered and accepted price, your lender will likely reduce the loan amount, and you may not be able to buy the house.
In addition, according to real estate experts, federal appraisal guidelines specify that lenders can’t pick and choose the appraisers they want to use. Usually, the appraiser is selected randomly from a group of qualified appraisers. The idea here is to promote fairness and impartiality.
The Actual Appraisal Process
A typical appraisal takes around six to eight hours from the beginning of the appraisal process to its completion. An appraiser usually begins by researching the property, especially with respect to location, and then schedules a time to visit the house. The actual visit and on-site inspection typically take about an hour. The appraiser’s main concerns will be the square footage and upgrades or renovations.
Another important aspect of the appraisal process is the comparative analysis (or “comps”). When running a comparative analysis, the appraiser looks at similar homes of comparable size, condition, and age in the same neighborhood or immediate area that have sold within the last six months to one year. This will let the appraiser know whether the contracted sale price is in line with the local market and market value.
Here’s a breakdown of the actual appraisal process tasks:
- Measuring the square footage
- Photographing rooms
- Examining upgrades
- Driving around the neighborhood to check out comparable homes
- Conducting a comparative analysis
- Compiling the appraisal report
- Submitting the appraisal report to the lender
Most often, the buyer pays for the appraisal. The typical appraisal fee ranges from around $350 to $500. It can, however, be more if it is a rush job or if the property is complex and demands more appraisal work, for example, if there are several detached buildings and structures. The buyer may also have to pay an additional appraisal management company fee, which usually runs about $250 to $450.
The Appraisal Report
Perhaps, the most important component of the appraisal process is the appraisal report. This is the formal report the appraiser submits to the lender, and it includes both the property’s determined value and how the appraiser arrived at that value. Lenders are required to give a copy of the report to buyers – a report that is generally 30+ pages and includes the following information:
- The property’s condition
- Assessment of the neighborhood
- Photos of both interior and exterior
- Lot maps
- Overview of the comparative analysis
- Breakdown of the appraisal process used to arrive at a valuation
- Actual assessed value
Typical Occurrences during the Appraisal Process in Lufkin
As real estate professionals will tell you, the purpose of the appraisal process is to protect both the buyer and the lender from making a bad deal. If the appraisal is higher than the asking price, then there should be no problems. But it if is lower, then things can get sticky, and you’ll need the help of a good agent. (To find out more about this, call (936) 676-3516.)
Suppose, for example, that you and the seller agreed on a price of $115,000, but then the property appraised at only $95,000. That’s a difference of $20,000, so what do you do then?
In this case, if your purchase contract was contingent on the appraisal, you can just walk away and get your earnest money back, too. But if you still want to buy the house (or didn’t have an appraisal contingency in the contract), you’ll have to pursue other options, such as:
- Make up the difference yourself from, say, savings or a 401k
- Have the seller cover the difference
- Pay for another appraisal (a second opinion)
If you do choose to walk away, you can feel comfortable knowing that the appraisal process did its job. You didn’t wind up paying more for the house than it is actually worth.
So, yes, the appraisal process can be complex and the outcome never certain. That’s why you need an experienced real estate agent by your side throughout the process.