What is a Home Appraisal?

An appraisal is a professional estimate of the value of a home done by a certified appraiser.Getting the right valuation of a home is crucial for buyers and sellers alike. For purchasers, lenders won't lend without an appraisal; meanwhile, if you're selling your property then it pays to understand how its value is calculated so you can get top dollar!

To help both sellers and buyers better understand home appraisals, we debunk some common myths about this process.

Myth #1: The home appraisal is the same as the home inspection

There's a common misconception that home inspections and appraisals are one in the same. That couldn't be further from the truth though - these tasks serve two very different purposes! An inspector looks for any problems with a property, like electrical or plumbing issues, mold growths, roof flaws etc., to make sure everyone involved is aware of all potential risks before closing on a deal. Whereas an appraisal takes into account both market value and physical condition when estimating worth so lenders can confidently approve your mortgage loan.

When your home is up for sale, it's appraiser to the rescue! Their mission? To pinpoint its market value that accurately reflects what buyers in the area are willing to pay. They'll look around and compare your property with similar homes sold recently (AKA "comps") before taking into consideration factors such as size, condition, location and quality of materials used on-site. Well done - you're one step closer to getting a final list price on your house!

Appraisers are usually focused on the value of a home, but when borrowers get an FHA or VA loan they can expect their appraiser to double as inspector too. That means taking note of any issues with the property that need attention - so don't neglect those repairs!

Myth #2: The buyer owns the appraisal

Since the buyer pays the appraisal, does the appraisal belong to the buyer?

It’s easy to assume that the appraiser works for the buyer. However, while the buyer certainly pays for the appraisal, the appraiser actually works for the lender. An article written by Ryan Lundquist, a certified appraiser, shows a copy of an appraisal report and clears up this common misconception. An appraisal report during a typical loan indicates that the client listed is the lender and that the buyer is listed as the user.

Appraising a home is like an independent investigation, helping the lender make sure they're not getting stuck with a bad deal. So if you ever need to buy or refinance property - rest assured lenders won't let just any value be assigned! Highly trained appraisers are unbiased and ethical in their report creation; it's also illegal for anyone (including buyers!) to put pressure on them when deciding what number to assign. Plus - everyone has legal rights too: Fannie Mae & Freddie Mac mortgage holders can get copies of all reports from the lender itself!

Myth #3: An appraisal will let you know how much the buyer will pay

Appraising a home isn't an exact science - it's just one person's opinion, based on the condition of the property and what similar houses have sold for in the area. It can provide guidance to lenders which helps them protect their investment but ultimately, how much you pay or accept is up to buyer and seller only.

When an appraisal doesn’t match up with the agreed-upon price, it's time to renegotiate! The bank won't give any extra cash - so both parties will need to come together and find a new purchase amount that works for all.

Myth #4: A bigger home has a higher appraisal value

When it comes to real estate, size doesn't always matter. If you’ve got a huge house in an otherwise average neighborhood, your home won’t be appraised as high and could actually do more harm than good! On the flip side though if you “buy the worst house on the best block," then that will help bring up your home's value since being surrounded by higher-priced homes increases its worth. Location is key so make sure to keep this classic rule of thumb in mind when hunting for property!

Myth #5: All home improvements raise the home’s value

It isn’t surprising that most sellers assume they will get equal value for every home improvement project they complete. But what they don’t know is that there are some home improvements that could actually lower its value, and appraisers won’t actually applaud you for those. If you've been looking to spruce up your home, it's worth keeping in mind that certain features have the ability to increase its value. While a fancy garage conversion from gym-to-living space may sound like a great idea--appraisers are more likely to base their judgement on key essential aspects of the house such as size and number of bedrooms. So if you're aiming for an upgrade with lasting impact, carving out an extra bedroom could do wonders!

Sure, you might think it's a good idea to give your home some extra flare with the most extravagant amenities – but too much can be counter-productive. When appraisers don't have sales data from nearby homes that are similar to yours, they won't know how valuable those features really are - and if there isn’t enough information out there about them, then your renovations could drastically overestimate the value of your house. So before making any changes or upgrades in and around the property - educate yourself first!

Bottom Line

Working with a good local real estate agent is the way to go if you're looking to ace your home appraisal. Not only can they ensure all crucial info ends up on their report, but realtors know how comparable properties affect appraisals and what features improve the worth of YOUR property - so take advantage!

If you need more advice, feel free to get in touch with one of our expert real estate agents here at Santa Sells Houses, and let’s talk about all your questions.