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If you’ve ever applied for a mortgage or home equity loan, bought or sold a house, refinanced a home or sold off assets after a loss or divorce, it is very likely that you are already familiar with home appraisals.
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Home appraisals are reports conducted by professional assessors to determine the value of a property. It’s easy to think of them as mere estimates based on opinion, but there is a distinct process involved and key considerations that every home appraisal should address.
No matter the size or type of property or whether you are an experienced home trader or are a first-time buyer or seller, it’s important to understand what home appraisals entail and how much they cost.
What Is a Home Appraisal?
An appraisal is performed by a professional in order to determine the worth of your home before you put it on the market. As Forbes noted, a lender will request one, but the buyer has to pay the cost, which varies depending on who conducts it.
Types of Home Appraisals
According to The Balance, home appraisals are required for all home loans and are backed by the federal government through the Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). But there are private companies who do less costly home appraisals. There will be a difference in cost depending on who you get to assess your home, whether through a conventional banking route or through a private company.
Why Do I Need a Home Appraisal?
Appraisals benefit the buyer, seller and lender. It is true that a house is worth however much someone is willing to spend, but an accurate value of a property is required because, as a seller, you don’t want to underestimate your price and get fleeced, and, as a buyer, you don’t want to overpay for something that isn’t worth its sale price.
However, as HomeGuide pointed out, the home appraisal’s main importance is to establish terms of a mortgage loan. They are required before you can get approved for a loan, and they give a good estimate of how much to lend to a loan applicant.
How Do Home Appraisals Work?
An appraiser will normally start with a comparable sales approach, looking at other homes in the area using recent sales, proximity and similarity as guides. According to Money Crashers, a home on the same street block will give a better indication of value “than one six …….