UNDERSTANDING HOME APPRAISALS: What You Need to Know
If you're in the process of buying or selling a home, you'll likely encounter the term "home appraisal." A home appraisal is a critical part of the homebuying process, and it's essential to understand what it is, how it works, and why it matters. In this blog post, we'll explore the ins and outs of home appraisals and what you need to know as a homebuyer or borrower.
What is a Home Appraisal? A home appraisal is an unbiased evaluation of a property's value by a licensed appraiser. The appraiser considers a variety of factors when determining a property's value, including the property's location, size, condition, and any recent improvements. The appraiser also considers the recent sales of comparable properties in the area to arrive at an accurate and fair market value for the home.
How Does a Home Appraisal Affect Homebuyers and Borrowers? A home appraisal is a critical step in the homebuying process because it determines the amount of money a lender is willing to lend a borrower. If the appraised value of the home is lower than the agreed-upon purchase price, the lender will only lend the amount of money based on the appraised value, which could mean the borrower needs to come up with additional funds to cover the difference.
A low home appraisal can also impact a home seller's ability to sell their home. If the appraised value of the home is lower than the asking price, the seller may need to lower the price or risk the buyer not being able to secure financing for the full amount.
It's important to note that the home appraisal is typically paid for by the borrower as part of the loan closing costs.
Check with Your Lender for Specifics. The specific requirements for home appraisals can vary depending on the lender and the type of loan being obtained. It's essential to check with your lender to understand their appraisal requirements and what you can expect during the appraisal process. There are many great banks in Rochester, MN that will explain this step further tailored to what they require and how it impacts your home purchase, be sure to talk to your lender, also let me know if you’d like a resource page of lenders in town that I would recommend, I’m happy to compile a list.
In conclusion, understanding home appraisals is crucial for anyone in the home buying or selling process. A home appraisal can significantly impact the amount of money a lender is willing to lend, the price a home sells for, and the amount of money a borrower needs to bring to the table. By understanding the appraisal process and working with a trusted lender, you can help ensure a smooth and successful homebuying experience.