If you’re financing a home purchase, you’ll likely need a home appraisal before closing. At Preslee Real Estate, we’re here to guide you through every step of the process, including understanding the importance of appraisals. Here’s what you need to know:
What is an Appraisal?
A home appraisal is an expert opinion on the market value of a property. It ensures the home’s purchase price aligns with its actual value, giving lenders confidence in their investment. Conducted by a licensed or certified residential appraiser, the process is independent and unbiased. Appraisers do not represent buyers or sellers but are tasked with providing an accurate valuation based on professional standards. If your appraiser is also a REALTOR®, they are committed to adhering to the REALTOR® Code of Ethics.
Why Do I Need an Appraisal?
For most homebuyers using a mortgage, an appraisal is required to determine the loan-to-value (LTV) ratio. This percentage shows how much of the home’s price you’re borrowing. Lenders typically prefer an LTV ratio of 80% or less. If you’re paying cash, an appraisal isn’t mandatory, but it’s a useful tool to avoid overpaying for a property. Some buyers or lenders may waive the appraisal to make an offer more attractive to sellers, but this isn’t common.
What Factors Influence the Appraisal?
Appraisers evaluate several aspects of a property, including:
- Recent sales of comparable homes (“comps”) in the area.
- The home’s condition and any recent improvements or renovations.
- Location, amenities, size, and unique features.
Appraisers rely on evidence-based methods and must remain independent and unbiased throughout the process.
Do Appraisals Always Include In-Person Visits?
Not always. While many appraisals involve an in-person visit to the property, hybrid and desktop appraisals are becoming more common. In these cases, appraisers collect data remotely and consult reliable third-party sources, such as agents familiar with comparable properties.
Can My Agent Communicate with the Appraiser?
Yes. Real estate agents are allowed to share property information with appraisers. However, it is unethical and illegal for anyone to attempt to influence the appraiser’s valuation through intimidation or bribery. Confidentiality is key, and appraisers cannot disclose sensitive information.
What Happens if the Appraised Value Differs from the Purchase Price?
If the appraisal comes in lower than the purchase price, it can impact how much you can borrow. To protect yourself, consider including an appraisal contingency in your purchase agreement. This allows you to renegotiate or cancel the transaction if the appraisal doesn’t match the purchase price. While not mandatory, this clause can provide peace of mind.
Will I Receive a Copy of the Appraisal?
If you are the buyer, the Federal Equal Credit Opportunity Act requires your lender to provide you with a free copy of the appraisal and any other written valuations. Sellers typically do not receive a copy of the appraisal unless the appraised value is lower than the purchase price and it becomes part of the renegotiation process. If your lender waives the appraisal requirement, you won’t receive a valuation report.
What if I Disagree with the Appraisal?
If you believe the appraiser overlooked important details, you can request a Reconsideration of Value (ROV) through your lender. Your agent can assist in gathering the necessary information to support your request. If you suspect the appraisal was biased or inaccurate, you can report it to state and federal regulatory agencies or a local fair housing organization.
Consult Your Real Estate Professional
The appraisal process may vary depending on local laws and regulations. At Preslee Real Estate, our experienced agents are here to answer your questions and guide you through the homebuying process. If you’re preparing to buy a home, feel free to reach out to our team for personalized advice.
For more information on appraisals, visit NAR’s Consumer Guide.
At Preslee Real Estate, we’re dedicated to helping you achieve your real estate goals with confidence. Contact us today to learn more about how we can assist you in buying or selling a home!
