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There are several important steps that come with the mortgage and homebuying process, and one of these is the home appraisal. Carried out when a buyer in the process of negotiating a home purchase with a seller, home appraisals are vital for obtaining an objective valuation of the home, plus for several other purposes.
At Primary Residential Mortgage, we're here to help clients in Nashville, TN and numerous nearby areas with all their mortgage and homebuying needs, offering a huge range of mortgage loans and walking our clients through the entire process. What exactly is a home appraisal, and why is it one of the most important parts of the homebuying process? Here are several basic themes to be aware of, including what various parties involved in home sales may need to know about them.
Home Appraisal Basics
When we talk about home appraisals, we're referring to a third-party valuation of a home that is typically performed as part of the mortgage loan process. This evaluation can be done for various reasons, including to determine how much a buyer might pay for the property in question, and whether or not the property itself is worth being purchased.
For most purchase situations, appraisals are carried out to establish a home's market value - in other words, to find out how much the property is worth in the current market. The appraiser will visit the home and inspect it thoroughly inside and out, after which they'll produce a report that gives their opinion on the property's value.
In other settings, appraisal purposes may vary. If you're refinancing, for instance, the appraisal may be carried out to find out how much your home has increased in value since you purchased it - this is important for learning how much equity you have in the property (more on this below).
In any case, appraisals are objective evaluations that can be immensely helpful for all parties involved in a home sale - buyers, sellers, and their respective real estate agents. Let's learn more about them.
Appraisal Process, Factors and Report
In nearly all cases of a home purchase, the appraisal will be ordered by the lender - remember, they need to make sure that the property is worth at least as much as the loan amount being issued. After ordering the appraisal, the lender will provide the appraiser with some basic information on the property in question, after which the appraiser will visit the home to inspect it.
As we noted, the appraiser will examine both the interior and exterior of the home, looking at key features, finishes, and so on. They'll also take note of the property's location, as well as any recent comparable sales in the area.
All of this information will be used to produce a detailed report with the appraiser's opinion on the property's market value. If the property is deemed worthy of being purchased, lenders will then be able to provide their borrowers with home financing.
The appraisal report will be sent to both buyers and sellers (and their various representatives), and will typically include all of the following elements:
- A street map showing the property, plus comparable sales that were used to determine market value
- An interior and exterior photo of the property
- Detailed information on the property's features, including square footage, number of bedrooms/bathrooms, age, and so on
- The appraiser's opinion of the property's market value
- Any other pertinent information, such as land records, etc.
Appraisal Process Timeline
While the appraisal itself will only involve a few hours of the appraiser's time, the entire appraisal process can take a bit to complete. Here's a brief overview of how it works:
- Once the initial loan estimate has been disclosed, and the borrower has given their intent to proceed, the buyer's lender will order the appraisal and provide the appraiser with basic information on the property
- The appraiser will visit the property and inspect it inside and out
- The appraiser will collect data on comparable sales in the area
- The appraiser will compile all of this information into a detailed report
- A copy of the appraisal report will be disclosed to the borrower
Generally speaking, this process will take between one to four weeks to complete, two weeks as an average. Factors such as rural locations, unique properties, appraiser availability, etc. can add to this timeline.
Appraisal Cost
The cost of an appraisal will vary depending on key factors such as the type of loan or property type. In most cases, however, you can expect to pay between $500 and $750 for a standard home appraisal. This cost will typically be rolled into the closing costs for the home if the sale proceeds.
For more on home appraisals and the important role they play in the mortgage process, or to learn about any of our mortgage rates or home loan services for clients in Nashville and surrounding areas, speak to the team at Primary Residential Mortgage today.
*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.