What appraisals are, what they look at in a home, and why you need one.

There’s a bit of confusion out there about how appraisals work, so I wanted to talk about them a today. A home appraisal is just a report that says how much the home is worth according to a licensed appraiser’s opinion. That appraiser is hired by your lender to evaluate the property you’re going to buy.

These appraisers collect four basic points of information. The first piece of information they’ll consider is the square footage of the property. Then they’ll compare it to homes of a similar size. 

They’ll also look at the quality of the building materials. For example, one house might have an expensive steel roof that will last forever, but another might have a three-tab shingle roof, which is very low-grade. The type of siding is another common consideration.

“If your lender ordered it, you have to have an appraisal.”

The third point of information they collect is the home’s current condition. There may be a similar home down the street, but it has a new roof, fresh siding, and an upgraded interior. The home you’re purchasing might not have those upgrades yet.

The last point of information is what’s nearby. Are there railroad tracks behind the house or a busy street out front? Is there a gas station down the street? These factors can sometimes confuse a borrower about why their home didn’t appraise as much as another home nearby.

Appraisals are very different from inspections; inspections are something you order as the buyer. You can choose to skip the inspection, but you have to do the appraisal. 

If you have any questions about appraisals or real estate in general, feel free to call or email me. I’d love to hear from you.