How to avoid a low home appraisal
Mar 03, · The home appraisal process takes two to four hours — and costs between $ and $ At the end of the evaluation, the appraiser will give you a detailed report breaking down your home’s value. This is the most extensive, and therefore most expensive, type of home appraisal. Jan 11, · A typical, single-family home appraisal will range from $ to $, though that can vary depending on a number of factors including the size of the home, the value of the property, condition of.
The best outcome from an appraisal would be to have the appraised value come in at least as high as the asking price. The bank bases the buyer's mortgage financing on the appraised value, so a low appraisal compared to the asking or proposed purchase price can lead to problems with completing a sale.
From the lender's point of view, the most important value when providing a mortgage loan is the appraised value. The appraisal is an independent, professional evaluation of the home's value in the current local real estate market. The maximum loan amount will be the lending limit percentage of the loan product times the appraised value. For example, if the buyers wants a loan that will provide up to 95 percent of the purchase price, the maximum loan size will be 95 percent of the appraised value or selling price, whichever is less.
The asking price will be the initial amount the buyer lists the home for sale. In many cases, the actual sale will be at a price higher or lower than the asking price. The appraisal value becomes an issue when the buyer and seller agree on a sales price for the home. However, if the seller knows in advance the appraisal value of the home, it gives her a good starting point for setting the asking price.
For example, the asking how much is it to get a house appraisal may be set above the appraised value, leaving room to negotiate to a lower selling price. A problem with the financing occurs if the appraised value is less than the agreed sales price. A low appraisal number compared to the selling or asking price has the ultimate result of requiring a higher than planned down payment from the buyer.
Of course, the buyer may not be able to increase the down payment by thousands or tens of thousands of dollars. It is possible that the seller may be forced to lower the asking price to a value closer to the appraised value. This would allow buyers to be able to purchase the home with down payments and financing that meet the lender loan-to-value limits. Tim Plaehn has been writing financial, investment and trading articles and blogs since His work has appeared online at Seeking Alpha, Marketwatch.
Plaehn has a cara cari teman di whatsapp degree in mathematics from the U. Air Force Academy. By Tim Plaehn Updated December 04, Related Articles.
What is the difference between an appraisal and an inspection?
An appraisal costs several hundred dollars and, generally, the borrower pays this fee. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified. During an appraisal, a licensed appraiser evaluates the home you want to buy in person and gives you an estimate on how much it’s worth. Typically, the appraiser is chosen by the lender but paid for by the buyer as part of the closing costs. Appraisals cost around $, but can cost a bit more or a bit less depending on your home size and location. What’s my house worth? Get your Zestimate instantly, improve your home value estimate with updated home facts or request a free market value from Zillow.
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List of Partners vendors. An appraisal is an unbiased professional opinion of a home's value. Appraisals are almost always used in purchase-and-sale transactions and commonly used in refinance transactions. In a purchase-and-sale transaction, an appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location, and features.
In a refinance transaction, an appraisal assures the lender that it isn't handing the borrower more money than the home is worth. Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. Lenders want to make sure that homeowners are not over-borrowing for a property because the home serves as collateral for the mortgage.
If the borrower should default on the mortgage and go into foreclosure, the lender will sell the home to recoup the money it lent. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario. Because the appraisal primarily protects the lender's interests, the lender will usually order the appraisal. An appraisal costs several hundred dollars and, generally, the borrower pays this fee.
According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified—as required in all 50 states—and be familiar with the local area. Per federal regulations, the appraiser must be impartial and have no direct or indirect interest in the transaction. A property's appraisal value is influenced by recent sales of similar properties and by current market trends. The home's amenities, the number of bedrooms and bathrooms, floor plan functionality, and square footage are also key factors in assessing the home's value.
The appraiser must do a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property's value, such as needed repairs. The report asks the appraiser to describe the interior and exterior of the property, the neighborhood, and nearby comparable sales. The appraiser then provides an analysis and conclusions about the property's value based on their observations.
The report must include:. If the appraisal comes in at or above the contract price, the transaction proceeds as planned. If the appraisal comes in below the contract price, however, it can delay or derail the transaction. Chances are, neither you nor the seller wants the transaction to fall through.
As the buyer, you have an advantage, in that a low appraisal can serve as a negotiating tool to convince the seller to lower the price. The bank won't lend you or any other prospective buyer more than the home is worth. While appraisals help buyers avoid overpaying for homes, a seller may feel that a low appraisal is inaccurate and be reluctant to drop the price. If a bad appraisal is standing between you and your home purchase or sale, look into getting a second opinion via another appraisal by a different person.
Appraisers can make mistakes or have imperfect information. Better yet, present a factual case for a higher value to the original appraiser. They may agree with you and revise the evaluation. Federal guidelines intended to eliminate the inflated appraisal values that contributed to the housing crisis sometimes cause appraisals to come in below fair market value and can make low appraisals difficult to challenge.
Holding out for an all-cash buyer who doesn't require an appraisal as a condition of completing the transaction is unlikely to net you a higher sales price. No one wants to overpay for a home. Unfortunately, if your surrounding area has experienced recent distressed sales , that can lower your home's appraisal value. Getting an appraisal is also a required step when giving a home to a family member as a gift of equity.
If you're refinancing a conventional mortgage , a low appraisal can prevent you from doing so. The home needs to appraise at or above the amount you want to refinance for your loan to be approved. However, if your existing mortgage is an FHA mortgage , you can refinance without an appraisal through the FHA Streamline program—a great option for underwater homeowners. When everything goes smoothly, the home appraisal is just another box to check on a closing checklist.
When the appraisal value is lower than expected, the transaction can be delayed or even canceled. Regardless of which situation you encounter in your home buying, selling, or refinancing experience, a basic understanding of how the appraisal process functions can only work in your favor, especially if you're buying your first home.
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Advice for Refinancing Homeowners. The Bottom Line. Key Takeaways An appraisal is an unbiased professional opinion of the value of a home and is used whenever a mortgage is involved in the buying, refinancing, or selling of that property.
A qualified appraiser creates a report based on a visual inspection, using recent sales of similar properties, current market trends, and aspects of the home e. The borrower usually pays the appraisal fee, which can be several hundred dollars.
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