A home appraisal will typically take anywhere from one to two weeks to complete from the time it is ordered. Each appraisal will be a little different, however, and a busy real estate market, rural location, or a number of other factors can affect the timing.
The appraisal is one of the final steps before a real estate contract closes, and it is anticipated with both nerves and excitement. What exactly is an appraisal though and why is it necessary? We will explore the steps and timing of a typical appraisal in this article and discuss factors and potential outcomes so you know what to expect.
So, What Is a Home Appraisal?
An appraisal is a property valuation conducted by a licensed professional appraiser to determine a home’s fair market value. Mortgage lenders will require an appraisal to be conducted for all homes they finance, including both purchase and refinancing.
The average cost for a home appraisal is usually between $300-$400, though the location and size of the property being appraised can cause the cost to increase. This cost will typically be paid by the buyer.
What Happens During a Home Appraisal?
While timing is not exactly the same for all home appraisals, there is a typical schedule that they follow. As mentioned above, the ordering of the appraisal to the delivery of the report usually takes between two to ten days. There are four main steps in the appraisal process.
Step 1: Schedule
The first step in the appraisal process is to schedule your appraisal, which is done by the mortgage lender. They will contact a licensed professional appraiser and request a walk-through.
How long will this usually take? 24-48 hours, but can be longer, depending on market demand and available appraisers.
Step 2: Walk-Through
Much like a home inspection, your appraiser will physically come to the home and do a walk-through, assessing the overall property condition and making note of any issues or new additions.
How long will this usually take? 30 minutes - 3 hours, depending on the size, location, and condition of the property.
Step 3: Research
Once the physical walk-through has been completed, your appraiser will conduct market research to compare the property to similar recently sold homes in the area. They will use this comparative market analysis to help decide the market value of the home.
The appraiser will also look at property records and data from the local Multiple Listing Service (MLS) for background and legal information about the property and local real estate market.
How long will this usually take? 1-2 days, depending on the property, local market, and skill level of the appraiser.
Step 4: Preparing the Report
The final step in the appraisal process is for the appraiser to take all information they learned during the walk-through and their research and create a detailed report. This report, which is typically around ten pages, will give the appraiser’s estimate of the fair market value for the home, along with details explaining how they arrived at that number.
How long will this usually take? 2-7 days, depending on the appraiser’s workload and how complex the appraisal report needs to be.
What Factors Impact Your Appraisal?
An appraiser will take many factors into consideration to estimate the property value, including market research of other homes in the area, the home’s general condition, and any improvements made to the property by the current or previous owners. The most common factors considered include:
* Factor 1: Size. The size of the property, including the square footage of the home and the size of the lot will be noted.
* Factor 2: Age and Condition. An appraiser will inspect the overall age and condition of the home, looking for existing issues, potential issues, and repairs that need to be made.
* Factor 3: Upgrades and Additions. If the current owner of the property has made upgrades, such as installing new flooring, building a deck, or redoing an outdated bathroom, those new features will be factored in as well.
* Factor 4: Curb Appeal. The overall appearance of the home and the condition of the landscaping will also affect the appraisal value.
* Factor 5: Neighborhood and Location. The appraiser will investigate the general location of the property and the neighborhood, taking into account the overall condition of homes in the area, as well as nearby amenities like grocery stores, schools, and commute times to major roadways.
* Factor 6: Comparables. Recent home sales in the area, usually those sold within a year, will also be used to determine a home’s market value.
* Factor 7: Current Market Conditions. An appraiser will also consider both the current conditions and projected conditions of the local housing market when writing an appraisal report.
* Factor 8: Legal Entanglements. They will also conduct research to ascertain whether the property has any legal issues, including liens, zoning violations, and unpaid property taxes.
What Can Delay An Appraisal?
One of the most common reasons for a delayed appraisal is how active the local real estate market is. In a “hot” market, appraisals are often delayed because there are simply not enough available appraisers to handle the current workload.
Another common reason why an appraisal might be delayed is scheduling conflicts with the property owner or seller’s agent. The appraiser will need to gain access to the home in order to complete the appraisal report. If they are unable to schedule that access quickly, it will mean a delay in receiving the final report.
How Do I Prepare for an Appraisal?
As the property owner, you can prepare for an upcoming appraisal the same way you would prepare to put your home on the market, or for a home inspection. It is important that the appraiser see your property at its best.
Give everything a thorough cleaning and make cosmetic touch-ups where possible. That said, you should never try to hide an issue from an appraiser (it wouldn’t work anyway).
Look around your home as if you were a stranger and make note of any easy fixes that negatively catch your eye. As an example, you can finish any half-completed home improvement projects, power wash your siding, and replace cracked outlet covers if you haven’t already.
Another great preparation step is to make a list of all improvements or additions you have made to the property to give to the appraiser. While these will often increase the overall appraised value of the home, sellers should be aware that they won’t always fully recoup the cost of the improvements.
What Happens After an Appraisal?
Once the appraisal report is completed, it will be delivered to the mortgage lender who ordered the report. Depending on what the appraisal report says, this could positively or negatively affect the contract.
If a home appraises at or above the contract price, the financing will be finalized and both parties will be able to proceed to the closing.
A mortgage lender will not agree to lend more than the home is worth. So, if a home is appraised for less than the contract price, there are options that will have to be considered.
Whether you are the buyer or seller, it is important to speak with your Realtor about all of your options before making a decision.
The first option is that the buyers and sellers could choose to renegotiate the contract based on the appraised value. This could mean the sellers offer to pay closing costs, or lower the contract price, and/or the buyers agree to make a higher down payment to compensate for the difference.
Another option is that the buyers could agree to pay the difference out of pocket. In a hot seller’s market, where homes are selling well above their appraised market value, this may be a more common outcome.
The sellers could also choose to dispute the appraised value. By reviewing the detailed report it may be found that the comparable properties were not accurate, the square footage was off, or certain upgrades were not taken into account.
The least desirable outcome, but one that does happen from time to time, is that the contract falls through due to lack of financing and the home goes back on the market. A low appraisal is not an insurmountable obstacle in a real estate contract, but it will complicate things and will have to be addressed.
The appraisal process is a vital step in any real estate transaction that involves financing. While it can be nerve-wracking, it doesn’t need to be approached with fear. As a seller, you can be confident that your Realtor is skilled at knowing how to determine a fair market value for your home, so appraising at your asking price should not be an issue. With a little prep work, you can be sure that your property is valued as highly as possible.
As a buyer, the appraisal ensures that your investment is a sound one and will give you valuable information about the state of the property. It is one of the final steps to closing on your new home and should be looked forward to with excitement!
If you are thinking about buying or selling real estate in the central Texas area, we would love to help you. Visit us online at homecity.com to get started today.