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Home appraisals are the norm whether you are buying or selling a property. To determine the property’s value, a professional is hired to conduct a detailed inspection of the home, and their job is to determine whether the asking price is worth the value. Apart from that, buyers also need to conduct home appraisals for mortgage and loan approvals. Interested in learning more? Here's all you need to know about home appraisals and how they work.
What is A Home Appraisal?
A home appraisal is when a professional, objective individual inspects a property to determine its fair value. To conduct an appraisal, the agent will analyze a few factors. These may include, but aren't limited to, the property's location, materials used in construction and structural condition, the age of the property, all recent updates and renovations, market demand, and houses surrounding the property. This detailed inspection is needed for two purposes:
- Lenders require appraisals for mortgage loans/refinances.
- To determine the property's value and set the selling price.
Are Appraisals and Home Inspections The Same?
Although they seem the same, they are not. Home inspections are conducted by potential buyers to eliminate hazards and risks before buying a property. They are more to evaluate the safety and structural soundness of the property. On the other hand, appraisals are conducted to understand the true value of a property. They may seem the same, and cost about the same, but they are two different inspections conducted by two different third parties and for two independent objectives.
What is the Average Cost of An Appraisal?
The cost of an appraisal depends on the location and size of the property, repairs and renovations, and other similar factors. However, in a 2023 survey conducted by the National Association of Realtors, an average single-family home appraisal was around $500. The cost can go as low as $300 and as high as $800, depending on the size of the property. The fee for a professional appraiser is regulated by federal law, however, it still needs to be reasonable according to the geographic market.
Factors that May Influence The Cost of An Appraisal
- Size: the size of the property is the biggest factor; the larger the property, the more time it will take to properly appraise it.
- Repairs: If the property has damage, the cost of the appraisal goes up because it's more work on the appraiser's part to find and inspect the extent of the damage.
- Amount of Comps: Comps are the recent home sales in the area. If the property has no comparables or if it has unique features, the appraiser will have to work extra hard to evaluate the property and hence charge extra.
- Seasonal Circumstances: Rain, snow, hail, high wind, and seasonal changes are also factors that may increase the cost of appraisal.
Why Do You Need An Appraisal?
Home appraisals are beneficial for both buyers and sellers. For the seller, it gives confidence regarding the asking price of the property. For the buyer, it ensures the value of the property; this helps with the mortgage as well as getting home loans. With an appraisal in hand, the buyer can expect the lender to make their offer according to the loan-to-value ratio.
Who Pays for the Appraisal?
Typically, an appraisal is required by a lender to accommodate the buyer's loan. Hence, it is paid by the buyer. However, the buyer, the seller, and the lender are all prohibited from having any connections with the appraiser. As per federal law, the appraiser should be an unbiased entity.
Appraisals are normal, and they are also required in many real estate transactions. Moreover, they are in the best interests of all the parties involved helping ensure a fair deal.
RCN Capital
RCN Capital offers short-term and long-term financing options for real estate investors, commercial contractors, developers & small business owners across the nation. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs. Connect with us today to discuss your next real estate investment.
