![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/07\/Ultimate-appraisal-guide.png\")
<\/a>First: What\u2019s a mortgage appraisal?<\/h2>\n
It takes work to determine the true value of any financial asset, and a home is no different. Anytime a seller sells a home to anyone besides a cash buyer<\/a> \u2014 that is, anytime a buyer uses a mortgage<\/a> to purchase a home \u2014 the lender will require an appraisal to determine the value of that home so they can confirm they\u2019re not lending more than it\u2019s worth.<\/p>\n Mortgages are secured loans, which means if the borrower stops making payments on the loan, then the lender can take possession of the house. In this way, the buyer\u2019s mortgage is backed by an appropriately valued collateral \u2014 the house itself.<\/p>\n Getting a mortgage appraisal follows a standardized process, during which an independent, licensed appraiser inspects the interior and exterior of the home, in addition to other factors, before producing an analysis, which includes a professional opinion of the final value of the home.<\/p>\n Here\u2019s how the mortgage appraisal process works.<\/p>\n The appraisal takes place after the inspection and is usually ordered through an independent third party like an appraisal management company, so there should be no contact between the appraiser and the buyer or seller.<\/p>\n Lenders generally work through an appraisal management company (AMC) or maintain a list of approved appraisal companies, which in turn work with a pool of individual appraisers.<\/p>\n In a busy market with a finite number of appraisers, it can take a few days to get the actual appraisal scheduled, and additional days or weeks for the appraisal to be completed<\/a>.<\/p>\n \u201cIn my experience with my buyers and sellers, it\u2019s really the waiting that\u2019s the toughest part,\u201d says top Spokane agent Steven Silbar<\/a>, who has a track record of selling homes 43% quicker than other agents in his area.<\/p>\n The time involved in completing the appraisal makes picking the right lender all the more important.<\/p>\n \u201cAs you\u2019re interviewing your lenders, don\u2019t just look for the lowest rate<\/a>. Ask them about their appraisal order and review process so you can have assurance that they can get through it quickly and not slow down the transactions,\u201d says Silbar.<\/p>\n \u201cI\u2019ve seen some buyers get put into a tough position because they couldn\u2019t close in the timeframe on the offer.\u201d<\/p><\/blockquote>\n For example, if the appraisal process results in a closing window extension from 30 days to 45 or even 60 days, it\u2019s better to know that upfront and write a longer closing window into your offer.<\/p>\n Prior to the walkthrough, the appraiser will note the address of the home and whether it\u2019s rented, owner-occupied, or vacant. They will also take a look at the sales contract<\/a>, which will inform them how much you offered on the house, or they will note that they didn\u2019t have the contract in front of them.<\/p>\n Other contributing factors include the location of your home and the property values of nearby homes. Trends in neighborhood property values can notably influence the appraisal value of your home.<\/p>\n During the walkthrough, the appraiser assesses several factors<\/a> before issuing their final judgment on the value of the home.<\/p>\n The condition of the home, including the interiors and the exteriors, is one of the primary factors that influence the appraisal value. The number of rooms and the availability of windows and closets play into the value, as do health and safety issues, such as the condition of the HVAC and electric systems, as well as possible hazards like peeling or chipping paint.<\/p>\n Safety issues, such as lead in the paint, are particularly relevant when the buyer is taking out an FHA<\/a> or VA loan<\/a>; in these cases, the appraiser may provide an appraisal value conditional upon the seller making repairs to address issues uncovered during the walkthrough.<\/p>\n Is the house liveable in its current condition? If not, the appraisal value will come in lower. On the other hand, improvements or upgrades made to the home \u2014 including those on ancillary structures like sheds, garages, decks, and pools \u2014 can increase the appraisal value of the home.<\/p>\n The appraiser will then find comparable recently sold homes<\/a> (or comps) and evaluate whether this<\/i> home\u2019s sales price tracks to theirs.<\/p>\n These comps usually have to meet certain criteria to be included in the comparison pool, including being near the exact location as the home being appraised, having the same number of rooms, having comparably similar square footage, and being of comparable age.<\/p>\n If relevant, the appraiser may also include prior sales of the subject home in their evaluation.<\/p>\n Finally, the appraiser will compile all their research into a report that\u2019s typically based on the Uniform Residential Appraisal Form<\/a> and deliver it to the lender, with a copy also given to the buyer.<\/p>\n Here\u2019s where the final appraisal value is reported. This document will include photographs of the home, explanations of how the value was calculated, and other information, such as market sales data, and any public land or tax records that were considered in the evaluation process.<\/p>\n Was the appraisal at or above your offer price? You\u2019re good to go!<\/p>\n However, although this happens less than 10% of the time<\/a>, there\u2019s a chance that your appraisal value will come in below your offer price.<\/p>\nStep 1: The appraisal is ordered and scheduled<\/h3>\n
<\/a>Step 2: The appraiser conducts research<\/h3>\n
Step 3: The appraiser walks through the house<\/h3>\n
Step 4: Comps and prior sales<\/h3>\n
Step 5: The formal report<\/h3>\n
<\/a>Step 6: Last steps to finalize your loan<\/h3>\n