When you are in the home buying process, the home appraisal plays an important role. So, you must have at least a basic understanding of this process. Don’t you want to make sure that you are paying for the true market value of the house? When you are refinancing, an appraiser considers the market conditions and comparable sales to assess the value. The appraiser does not consider the lender’s or the borrower’s estimate or loan amount. 

Home appraisal

Home appraisal is the process of value assessment of a property by an impartial third party for a purchase or refinancing. Mortgage lenders go for a home appraisal to ensure that they are not lending too much money. After all, when the buyer defaults, they want to get their money back through a sale. So, an appraisal helps both the buyer and mortgage lenders. The buyer learns that he is not going to pay more than the market value.        

An appraiser considers a lot of factors while doing a home appraisal. These factors include size, location, condition, amenities and features the owner has installed. After that, the appraiser considers the price of comparable homes and determines the free-market value of that home.        

This process is often a very frustrating experience for owners, especially in the case of refinancing. The process of a home appraiser is equally frustrating to the lender as well. They need some input in this aspect of the loan. The lender and the appraiser have no affiliation.

Lenders and appraisers allowed no contact

Prior to the housing market crash, mortgage lenders were known for pushing appraisers to inflate values, especially in refinancing. Some appraisers and lenders used to have a cozy relationship. They often used to consult the loan officers about the value required to seal the deal. This practice was one of the reasons behind the housing bubble.

After the bubble burst, new regulations were placed to eliminate the role of lenders in this process. Lenders can have no direct contact with the appraiser. It is the job of a third party to select an appraiser and coordinate an appointment with the homeowner. So, there is no artificial inflation of values. Lenders cannot push appraisers. However, this new layer of bureaucracy can cause delays. Now, it is not possible for a loan officer to help his borrower to coordinate an appraisal appointment. 

Costs and valuation 

Appraisal project cost depends on the region. If we consider the average cost, it ranges from $300 to $500 for a single-family house or condo. And, if it is a more complex property, the cost will be higher. The appraisal cost will be higher for a multi-unit property. If some repair is required prior to closing, the appraiser has to certify completion. There will be an additional $100 to $150 cost for that. 

To determine the value, the appraiser considers the value of similar houses in the neighborhood sold within a period of six months. The appraiser also makes adjustments for a deck, a yard or any other additional feature.     

If you don’t agree with the home appraisal, you can dispute the value. You can work a company offering direct valuations solutions and appraisal services.