Home Appraisal: Myths and Facts
If you’re financing your new home, a home appraisal is required. There are many misunderstandings about what a home appraisal is and isn’t. If you are buying or selling, you should understand what it is and how the appraiser determines the fair market value of your home.
Myth: A Home Appraisal is the Same as an Inspection
This is one of the most common misunderstandings when it comes to a home appraisal. The appraisal looks at the overall condition of the home when compared to others nearby. Your appraiser compares the home you’re buying to others that have recently sold with comparable square footage, features, and condition. It does not include an evaluation of the foundation, roof, windows, appliances, or flooring. You should have both an appraisal and a home inspection before purchasing a home.
Myth: Home Remodeling Increases Your Home’s Appraisal
Just because you recently remodeled your kitchen for $60,000 doesn’t mean that your home will be worth $60,000 more than an identical home without a new kitchen. According to Remodeling Magazine Cost vs. Value report, there are few upgrades you can make to your home that provide even close to a 100% return on investment.
Myth: The Appraiser Works for the Buyer
The buyer pays for the appraisal but ultimately the appraiser works for the lender. Banks order appraisals in case the buyer defaults on their loan. That way the bank has some assurance that they can turn around and sell the home for at least the balance of the loan. If you feel the appraisal came in too low, you can dispute it as long as you have facts to back up your reasoning. Provide any information that you believe increases the value of the property to the appraisal company and they should order a new appraisal.
Myth: Appraised, Assessed, and Fair Market Value Should All be the Same
As a homebuyer, you will see many valuations on the home. They are not the same. An appraised value tells you what the lender sees as the value of the home. The assessed value is what you’ll be taxed on, and every municipality has a different method of determining the taxed value of the home. A fair market value is the price that a buyer is willing to pay and a seller will accept. These values (plus any website’s online valuation) may vary by tens of thousands of dollars.
You can buy a home for more than the appraised value, but you’ll likely have to come up with the cash to cover the difference between the appraised value and the purchase price. The assessed value has little to do with the selling or buying process other than what the seller will pay regarding property tax due at closing. Hamilton Group Funding requires appraisals for all their loans, but we offer many types of loans to help you purchase the home you want. Speak to an experienced and knowledgeable mortgage consultant and contact us today.