Understanding the appraisal process and report
Let’s say you’re in the market for your first home. When you’re ready to buy and apply for a home loan, you’ll usually be asked to have a property appraisal completed.
What is a home appraisal?
An appraisal of your home is an independent estimate of the fair market value of a home. This is based on research of recently comparable homes sold in your area, an inspection of the property, and the appraiser’s opinion. A licensed or certified appraiser is responsible for conducting the review.
The mortgage lender requires an appraisal to assess the fair market value and ensure they are offering the correct loan amount to the borrower. The loan amount is based on the sales price or appraisal value, whichever is lower. If the appraised amount is less than the asking price:
- The seller may reduce the price to match the appraisal.
- The buyer may pay the difference in cash at closing.
- The buyer walks away.
Not only may an appraisal include sales information about similar properties, but it may also include the property’s condition and location.
What are they looking for?
Professional appraisers aren’t evaluating the furniture or the photos hanging on the walls. They are looking at the condition of permanent physical characteristics of the home. These include age, square footage, the number of bedrooms and baths, lot size, and location. Other factors include:
- Characteristics of the neighborhood.
- Local housing market trends.
- Condition of the home.
- Appliances.
- Amenities such as decks or fireplaces.
- Home improvements and renovations.
What is in the appraisal report?
After the appraisal is done, you’ll receive a copy of the appraisal report. The report includes:
- Appraised value: This is a specific number the appraiser decides on after analyzing the home’s features and recent sales in the market.
- Property overview: The appraiser reviews the property’s age, location, square footage, occupancy, floor plan, number of bedrooms and bathrooms, design and quality of construction, heating and cooling systems, and landscaping.
- Issues: The appraiser will include any issues such as structural problems or design defects.
- Summary of local market trends: The report gives an overview of comparable properties, public records, and local market analysis.
- Other considerations: Other conditions may affect the home’s estimated value including easements or encroachments.
Looking to buy a home?
Adirondack Bank offers a variety of mortgage products with convenient terms and competitive rates. Whether it’s your first home or a refinance, we have the product that will suit your needs. Let your team of professional and dedicated staff help you choose the product that’s right for you. Contact one of our mortgage loan originators for more details.
The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.
