It’s finally happened — after months of searching, you’ve found your dream home. It’s the perfect size for your growing family, the kitchen was just remodeled and there’s a huge deck for entertaining. And best of all, the seller accepted your offer!
As we near your closing date, your lender will want to verify the home’s value with an appraisal. This might sound nerve-wracking, but don’t worry: Appraisals protect you from overpaying.
Let’s dive into appraisals to demystify the process:
When do you need an appraisal?
If you’re taking out a mortgage to buy a new home, the lender will require an appraisal. The appraiser gives an independent estimate of the property based on recent sales data of similar homes.
When your mortgage amount matches the appraised price of the home, you know that you have a good loan-to-value ratio — and aren’t paying more than you should be.
What does an appraiser look for?
An appraiser will physically measure the home’s square footage and visually inspect the entire property. They’ll note things like:
- Floor plan functionality and the number of bedrooms and bathrooms
- Age of the house and its overall appearance
- Value of any recent updates or remodeling
- Size of the lot
- Desirability of the surrounding neighborhood
After comparing all of that against similar nearby homes sold within the last 90 days, the appraiser arrives at your home’s value.
What if it’s valued for less than you expected?
Let’s say you agreed to buy the property for $250,000 but the appraisal came in at $225,000. Your lender won’t approve a loan for more than the appraised price.
If you still want to buy the home, a lower price can be negotiated with the seller or you can challenge the appraisal and pay for a second opinion.
Another option is to walk away. This may not sound ideal, and it will probably be hard to do. But the goal is to get you the right home at the best price.
If an appraisal comes in low, we’ll discuss all the options available to make sure you don’t overpay.
Are you ready to find your dream home? Reach out today to get started.