U.S. real estate industry statistics show that the average cost of a property assessment is $331, with a typical range of $288 to $374. For a home appraisal, the low end of the range is $250, and the high end is $450.
The price of a home evaluation depends on a number of variables, such as the size of the house, the state in which it is situated, and the length of the appraisal process because any difficulties could keep the appraiser on the site longer than anticipated.
For logical reasons, geography may have an effect on the price of a home appraisal. The cost of completing a home appraisal on a 12-room luxury property in Manhattan or San Francisco will probably be less than that of a straightforward one-story house in a low-cost rural location. This is because the mortgage loan on an urban property is more likely to be higher, and the mortgage lender is taking a bigger risk by accepting that loan as opposed to one on a rural property.
A home appraisal is what?
If the buyer is getting a mortgage, you can’t buy or sell a house without a home evaluation since mortgage lenders sometimes rely their decision on whether to offer financing on the results of a home appraisal.
A home appraisal is by definition an impartial assessment of a property’s market value that is based on a careful inspection of the house and surrounding grounds. Mortgage lenders utilize a house appraisal in addition to determining a home’s value to make sure they aren’t giving the buyer a loan for more than the property is worth.
A home evaluation typically examines every aspect of a property but gives the following factors the highest priority:
- The size and current state of the property are equally important.
- The property’s location, including the community in which it is situated.
- The state of the interior components of the house, such as the windows, roof, doors, kitchen, bathrooms, plumbing, and garage. Additionally, layout and total square footage are top factors.
- Any improvements made to a house, such as room additions, patios and decks, furnishings, drywall, flooring, a driveway, HVAC systems, and septic systems.
- Comparison of prices. A house appraiser is aware of—or ought to be aware of—the price of recently sold comparable homes in the area. This information provides the appraiser with a starting point sales figure to utilize as reference for valuing the house.
Who conducts the appraisal of homes?
Home appraisals are performed by certified experts in the field of property and home valuation (many originate from the construction, contracting, home care, and landscaping sectors). The state where the property is located is in charge of professional home appraisal licensing. Application requirements include passing a home appraisal exam in some states and completing 75 hours of study on fundamental home appraisal principles and procedures.
As their results have a significant impact on a house’s worth on the open market, qualified home appraisers are required to maintain total objectivity when evaluating a home and be prepared to support any conclusions they reach.
Who Covers a Home Appraisal Cost?
Typically, a home appraisal is covered by the buyer. The appraiser’s fee can either be paid up front by the buyer at the time of the appraisal or it can be included to the closing fees.
However, despite the fact that the buyer often pays for the evaluation, he or she does not request it. This is done by the mortgage lender, who has stake in the outcome and is looking for a precise evaluation of the home’s value. The lender must have faith in the state of the house or other property before granting the buyer money to acquire it. A home valued only $225,000 shouldn’t qualify for a $250,000 mortgage loan, after all.
What Sets a Home Appraisal Apart from a Home Inspection?
There are notable variations between a house appraisal and a home inspection.
Who the process aims to protect makes the largest difference, generally speaking.
The procedure of a home appraisal shields the mortgage lender from having to finance the home’s purchase. Because of this, an appraiser concentrates on outside factors like the neighborhood, comparable sales data, and the size of the house and property.
The goal of a house inspection is to safeguard the buyer, who often spends the few hundred dollars necessary to do one. Therefore, a home inspection professional’s top priority is to look inside, or “in the guts,” of the house, and inspect crucial areas like the roof (for any leaks), the attic and walls (for any signs of mold), as well as for significant electrical or structural problems that could endanger the safety of the home’s occupants or lower the property’s value.
What if the appraised value of your home is less than the sale price?
Actually, it’s not unusual for a home appraisal to produce a result that’s less than the asking price. Don’t be shocked if there is a discrepancy between the two prices because it is not a given that the appraisal and house sales amount must match.
Don’t freak out if something happens; you still have options. There are a number of steps purchasers typically take to keep the contract afloat if the appraisal for the house they want to buy comes in low:
Requesting that the seller match the appraised value
The buyer can ask the seller if they will reduce the sales price to reflect the appraisal price, assuming the buyer is still interested in purchasing the home and has the legal right to back out if the appraisal is low. Asking is always beneficial, and a motivated seller might agree. Any price reduction brought on by a low home appraisal would also require the involvement of the lender.
Offering to increase down payment for home purchase
In the event of a low home appraisal, a buyer may offer to increase his down payment to the mortgage lender in order to keep the contract alive. The buyer’s mortgage might be in jeopardy due to the reduced appraisal. Mortgage insurance (PMI), which borrowers must pay each month when their down payment is less than 20% of the purchase price, can be avoided if the buyer can increase his down payment in order to lower the amount he will borrow from the lender. If the owner agrees to lower the sales price, this is extremely beneficial. This price difference might be used by the buyer to increase his down payment, which will lower the monthly principal, long-term interest, and PMI payments.
Accept mortgage insurance payments
A buyer can also keep her current down payment but consent to pay PMI, the mortgage insurance that becomes due when the buyer must finance more than 80% of her house purchase, in order to cover a short appraisal. The cost of private mortgage insurance for borrowers who choose this option ranges from 0.5% to 1.0% of the entire loan amount. This implies that, for a $100,000 loan, the borrower may incur additional yearly home mortgage expenses of up to $1,000, increasing her monthly mortgage payment by more than $80.
Contest the appraisal’s conclusion
Another choice is to request a house appraisal figure be disputed by either the buyer or the seller. After all, home assessments are subjective, and a number of variables that may be miscalculated or completely ignored might lead to a lowball assessment. A buyer could get in touch with the lender with the help of her real estate agent and present her own information that might correct the low assessment amount. A dispute application is forwarded to the lender’s own mortgage assessment section for further review and, ideally, a determination that supports the sale price if the lender grants it.