One of the steps in buying or selling a home in Locust Grove (or anywhere!) is completing a home appraisal.  Whether you are the buyer or the seller, a home appraisal is one of the stopping points on the road to closing that has to be addressed. In fact, when buyers are using a mortgage to purchase a home, the transaction can not happen without the appraisal. Let’s take a deeper look into what a home appraisal is!

Who needs a home appraisal?

Any buyer who is using a mortgage to purchase a home in Locust Grove or elsewhere will be required by the mortgage company or bank to complete an appraisal on the home.  If a buyer plans to purchase a home with cash, then an appraisal is not necessary.

Home appraisals also happen when a homeowner is refinancing a home.

What is a home appraisal? 

A home appraisal is the lending bank’s estimated value of a home.  The buyer’s mortgage lender will order a home appraisal to take place through a third party appraisal company.  The appraiser will schedule a day to come to the home in Locust Grove to determine a value. It is usually a requirement from the bank before they will provide funds for the purchase of the home. The home appraisal lets the bank know that it is not lending out more money than the home is worth.

Who does a home appraisal?

The appraisal is completed by an appraiser; an appraiser is an independent and licensed person not connected to the buyers, sellers, or bank and is trained in determining the values of properties.  Appraisers gather information about the home (number of bedrooms/bathrooms, square footage, additions, ect) and use sold comparables (looking at similar homes in the neighborhood that recently sold) to determine an estimated value of the home.  They also look for safety hazards that could detract from the home’s value.  Certain loan programs, like VA or FHA, may have more specific standards.

When does a home appraisal happen?  Who pays for the home appraisal? 

The buyer’s mortgage lender will order an appraisal once the buyer and seller are under contract.  The buyers typically pay for the appraisal.  The appraiser will contract the selling agent to gain access to the property.  Once an appraiser visits the property, it usually takes at least a week for the report (if not more) to be written.  Your REALTOR®, whether you are the buyer or seller, will communicate with you when the appraisal is happening and whether the home’s list price is at, above, or below the appraisal.

Why do I need a home appraisal? 

An appraisal makes sure that buyers are not over paying for a home in Locust Grove (or anywhere else) and that the bank is not lending more money than what a home is worth.  Banks will not lend money to a buyer without completing an appraisal. If a buyer is purchasing a home with cash, then they may not need an appraisal. However, some buyers may choose to have an appraisal just to know the market value of the home.

What happens if the home appraisal is higher than the selling price? 

A home buyer has instant equity if the appraisal comes in higher than the sell price.  You can proceed with the home buying process.

What happens if the home appraisal is lower than the selling price? 

With an experienced Realtor®, appraisals that are lower than the sell price are rare, but they do happen.  In this case, the bank will not lend the buyer all the money necessary to purchase the home.  Read more about what to do here.