What is a home valuation and how much does it cost?

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When you apply for a mortgage to buy a home, the mortgage lender will ask for a home valuation. A licensed appraiser will visit the home you want to buy, then assess the value and provide the lender with the necessary information.

What is a home valuation?

A home appraisal is an expert opinion that indicates the value of a property.

A lender wants the home to be valued so the company can decide whether to officially approve a mortgage for you. It may decide not to give you a mortgage if the appraiser’s report states that the home is worth significantly less than you agreed to pay and plan to borrow. If you later default on your mortgage payments, the lender would sell the home to cover the remaining costs – but they wouldn’t make enough money on the sale if you borrowed more than the home is worth.

Rating can also protect you if your contract with the seller includes rating contingency. The emergency may include getting out of the business with your down payment or asking the seller to lower the price when the appraisal comes back stating the home is worth less than a certain amount.

House valuation vs. house inspection

A home appraisal will benefit both you and the lender, while a home inspection is solely for your benefit.

Appraisers estimate the value of a property. An inspector will not make a note of the value, but he will inform you of the condition of the house so that you know of any major or minor defects.

When you apply for a mortgage, an appraisal takes place and if the home turns out to be worth significantly less than the list price, the lender may decide not to give you a loan.

A review will take place after the seller has accepted your offer, but before closing.

How does a house valuation work?

Your lender does not do the evaluation – a licensed professional independent from the lender does. However, the lender will usually plan the evaluation.

In many cases, the appraiser will go home to explore the property and the whole house. However, there have been a few exceptions since the beginning of the coronary virus pandemic. A lender can allow a desktop assessment that a valuer can perform from a computer by looking at tax records and floor plans. Or, you could hire an appraiser to just look at the exterior of the house and they’ll likely use additional data to complete their appraisal.

It takes about a week from the time the lender plans the valuation to the valuer finishing their walk-through. An appraiser can spend up to a few hours in the home on a face-to-face visit, and the larger the property, the longer it takes to complete an appraisal.

What does an appraiser look out for?

When the appraiser visits the house, he will examine the following aspects to determine the value:

  • Inner: Is the home safe and are any parts of the walls, windows, or floors broken? They will check for water damage, infestation, and problems with the HVAC system.
  • Outside: You will check out the roof, chimney, siding, deck, and porch.
  • Location: The appraiser will look at the values ​​of the nearby houses. You will also see which schools and shops are nearby and take into account the crime rate.
  • Size: How many square meters is the house (including the garage, attic or basement) and how many rooms are there?
  • Handyman: If the seller has made improvements to the home in recent years – particularly energy efficient improvements to the roof, windows, insulation, or other features – the home could be worth more.

When you get an FHA, VA, or USDA mortgage, the appraiser will ensure that the property meets the specific standards required for this type of home loan.

How much does an appraisal cost?

According to HomeAdvisor, a typical home valuation costs $ 312 to $ 419. The larger a house or property, the more the appraisal costs.

The appraisal is usually more expensive for an FHA, VA or USDA mortgage than for a conventional mortgage. Your property must meet certain standards in order for you to qualify for one of these mortgages, so the appraiser will have to look for certain things.

As a buyer, you usually pay for the appraisal. However, it is possible to negotiate with the seller so that he pays the costs.

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