Before you buy a house, sell it, or refinance it, a home appraisal is an important part of the process. This is because in order to get involved with a home financially, all parties involved need to have a clear understanding of how much it is worth.
A home appraisal, also known as a real estate appraisal, property valuation, or land valuation, is the process of discovering the actual fair market value of a real estate property.
Most real estate transactions involving a loan company require an appraisal because every property is unique, and simple factors like location cannot determine the exact value of a home. It needs to be appraised.
During a real estate transaction, the lender will investigate what the property is actually worth and what the buyer has agreed to pay for it. They have a special interest in this because as the party lending the buyer the money, they have a responsibility to take possession of the home should the buyer default on their loan. The house then becomes the property of the bank, so lenders must do their due diligence to ensure their investment.
A home appraisal is different from a home inspection, which is more in-depth and involves having a professional look at the important functions of your home for any signs of damage or noteworthy concerns that could pose a risk to the buyer. A home appraisal focuses solely on the value of the home in relation to the market.
After your home inspection, you’ll need to get your property appraised. Wondering how the home appraisal process works? We’re answering all the questions you may have about the home appraisal process, including what home appraisers look for in a house, how much it costs, and how long it will take.
Who Performs the Home Appraisal?
Appraisals are not performed by your mortgage company. California state law requires that only an independent third party may perform a property appraisal, though your mortgage lender may help schedule or arrange the appraisal.
- Full appraisal: Involves inspecting the interior and exterior of the property – taking pictures, providing commentary, and comparing the home to others in the area.
- Exterior-Only Appraisal: Often referred to “drive-by” appraisals since the Appraiser is literally driving by the property.
- Rental Analysis: For loans on investment properties.
- Broker Price Opinion (BPO): A light appraisal that is not typically used when buying or refinancing a home. A BPO is most often used for mortgage insurance cancellation.
What Determines Your Home’s Appraisal Value?
Comparable sales play an important role in the California home appraisal process. These are similar homes that have sold recently in the same area as the property being appraised. They are commonly referred to as “comps” by industry professionals.
Appraisers usually look for houses that have sold within the last 90 days, within a mile of the appraisal home. They consider a variety of factors, such as:
- Property size (square footage)
- Number of bedrooms and bathrooms
- Overall condition and appearance of interior and exterior
- Amenities, features and additions
For example, a large 4 bedroom home in an area where mostly 3 bedroom homes have recently sold will have a higher value, and a house with peeling paint and a patchy lawn in a well-manicured suburb will appraise at a lower amount than otherwise similar properties.
As another example, a house without a pool located close to the city or beach would be appraised for higher than a similar house in the suburbs.
After the appraiser finishes their research, they make a final valuation of the property in a formal report. The appraiser then delivers the report to your mortgage lender.
How Much Does a Home Appraisal Cost and Who Pays?
In California, appraisals usually range between $300 and $600, on average, depending on the size and location of the home. The buyer pays for the appraisal unless they negotiate for the seller to pay instead.
The actual cost that you pay will vary based on the type and size of the property, the location, and other factors. If the property is on a very large plot of land, the appraisal cost will be more because the appraiser often surveys the boundary lines of the property to make sure that the listed square acreage is correct. Buyers can also expect to pay a higher appraisal fee in a very rural area simply because there are fewer appraisers working in these areas.
How Long Does a Home Appraisal Take?
An appraisal can take anywhere between a few days to several weeks from start to finish. This depends on factors such as the type of appraisal ordered by your lender, and the laws of the state where you live. The appraisal inspection itself can last from 15 minutes to several hours.
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Before you can get an appraisal done, you have to find the right house.
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