When it comes to getting a home loan, the appraisal value of the property you want to buy is very important. If you’re wondering what affects a home appraisal, you’re not alone. Fortunately, you can learn about appraisals so you know what to expect. Then you’ll have a better idea whether the house you want to buy will appraise for the value you’re hoping for. If the appraisal doesn’t come in high enough the deal may fall through, unless the seller is willing to lower the price or you can come up with a larger down payment to offset the difference. Either one of those scenarios can help you get the house you want, but they may not be options in your particular situation.
How big is the house you’re buying?
When you’re buying a house it’s important to get one that will actually meet your needs. The size of the house is going to affect how much the appraisal comes in at, all other things being equal. Of course, there’s more to the appraisal issue than just the size of the home. If it was all that mattered, smaller houses would always be worth less and bigger houses would always be worth more. That’s not the case, and some smaller homes in excellent condition can be worth much more than larger homes that need a significant amount of work. Many buyers can get caught off guard by that, as they expect the appraisal to come in much higher than what it actually does. That can mean they lose out on a house that they really wanted to buy.
What about the property’s location?
Where the property is located has a big effect on a home appraisal. Houses that are located in popular areas where there are many amenities and crime is low are going to have higher values than houses in less desirable neighborhoods. That’s based on what nearly any real estate agent will tell you, that location is the most important aspect of buying or selling a home. You can change nearly anything else about the house once it’s yours, but you can’t change where it’s located. Since appraisers know that, they have to focus on the current location of the home. They take the neighborhood into consideration when judging the value of the house and determining its overall worth.
Is an appraisal really subjective?
It’s important to make sure that you’re paying a fair price for a home. That’s part of the reason an appraisal is critical. Additionally, appraisals matter because the lender has to feel secure in loaning you money on the home. If the amount of the loan is higher than the value of the house, the lender could be in a financially compromised position. Despite the importance of the appraisal, though, it is subjective to some extent. Appraisers are human, and the values they assign to something may be a little bit different from one to the next. Most appraisals are similar to each other, but in some cases two or more appraisers would have very different beliefs about the value of a home. As long as the house appraises for enough to get the loan, the stated value is not a serious concern.
How do comparable home sales affect the property?
Comparable home sales, or comps, are the similar houses around the home’s location that have sold recently. Knowing the comps and what they can tell you about value can help you understand the appraisal. The comps can be good or bad for the appraisal value, depending on how many are available and how close they are to the home that is for sale. For example, a large property with a lot of acreage may not have very many recent comps in the area. The same is also true with very unique homes or properties that offer something most other properties don’t provide. By keeping that in mind, it’s possible for the appraiser to find the best comps and make a determination of the value of the home more easily in some cases than in others.
For properties that really don’t have good comps, the determination of value becomes more subjective. It can be harder to figure out what the appraisal value should be with those homes, but it is still necessary to appraise them. Some appraisers may move their search area for sold homes further away, while others may look at homes that sold a longer time ago than they would normally consider. Those aren’t ideal conditions in which to locate comps, but they may be the only realistic options that are offered in some parts of the country and for some types of properties.
What if you don’t agree with the value?
Not everyone will agree with the value that an appraiser places on a home. A low appraisal can be frustrating for a buyer who really wants to purchase the home, since it can mean that the buyer can’t get a loan for the needed amount. It can also frustrate the seller, since they may now not be able to get their home sold for a reasonable price. If you really don’t agree with the appraisal value of the home you want to purchase, there are ways in which it can be appealed. That’s often futile, but in some cases the appraisal is re-evaluated. In those cases, the value may come up enough to allow you to get your loan and close on the home. That can be well worth the trouble for a home you really love.
2 Point Highlight
When it comes to getting a home loan, the appraisal value of the property you want to buy is very important.
Knowing the comps and what they can tell you about value can help you understand the appraisal.
