Most people know what a home appraisal is, but they might not know why it is so vital when buying a house. If you want to buy a house, your lender will likely require an appraisal before closing on the property. An appraisal tells you a lot about the house you want to buy, and it also reveals things to your lender. Here are several things to understand about appraisals when purchasing a home.
How It Is Conducted
Getting a house appraised is a normal step of buying a house, but do you know how the process works? The purpose of this event is to find out how much a home is worth. To find this out, an appraiser assesses the home and compares it to other properties. Appraisals are only good for a few months, as they determine a home's value today. Because home prices fluctuate, you must get a current appraisal completed when buying a home. You cannot use an old one, even if it is from a few months ago.
One of the main steps an appraiser takes is comparing the home to recently sold properties. Based on the amounts the other properties sold for, the appraiser determines a value for your home today. When complete, they will send the appraisal report to you.
Why It Matters to Lenders
The assessment of the house you want to buy matters a lot to your lender. Your lender does not want to lend you more money than the home is worth. The lender might also require a specific percentage of the home's value as your down payment. While you might assume that a house is worth the amount you offered for it, it might not be. Your lender will not mind if the assessment reveals a higher value, but they will mind if it is a lower amount than what you offered to pay.
How It Can Affect the Deal
The only time an appraisal will affect a real estate deal is when the amount is less than the offer price. If this occurs, you might have to come up with a higher down payment than you originally planned to offer. You might also want to renegotiate with the seller to reach an agreement on a lower purchase price.
If you have any questions about buying a house, talk to your real estate appraiser. You can also contact a home appraiser if you have further questions.