One of the most important steps when buying a home is the appraisal process. Typically required by mortgage lenders, this crucial process determines the fair market value of the property that you plan to buy. The home appraisal process also protects you from paying more than what the home is worth.
What is a home appraisal?
This part of the real estate transaction involves deriving an unbiased, estimated value of the property you plan to purchase. Lenders require an appraisal to ensure that the purchase price is fair.
A home appraisal is often confused with a home inspection. While similar in the sense that these are both undertaken by a third party who comes in to inspect the property, these two processes differ in terms of purpose. A home appraisal involves finding the true value of a home while a home inspection focuses on its condition. And, unlike an appraisal, a home inspection is optional.
The appraisal is typically ordered by the mortgage lender and paid for by the buyer. The entire home appraisal process takes around a week or so. In Las Vegas, a home appraisal costs around $450, depending on the appraiser’s fee and the property size.
Factors considered in a home appraisal
When an appraiser evaluates a potential home, they look at the size, type, location, and condition of the property. Apart from the home itself, appraisers also evaluate the home’s location and certain neighborhood amenities. Zoning classification, vehicular access, and street utilities are taken into consideration, as well.
Here are some of the things that home appraisers look at:
- Structural integrity of the home
- Condition of the roof
- Number of bedrooms and bathrooms
- HVAC system
- Electrical and plumbing systems
- Visible defects
- Home improvements that add value
Personal property, movable objects, and the general look of the home are not included in the appraisal. The appraiser only takes into account installed items.
Similar homes are also factored in when calculating fair market value. Referred to as “comps,” appraisers compare your preferred home with recently sold homes in the community with similar features, amenities, age, and condition.
The home appraisal process
Once the buyer and seller agree on a price and sign the purchase agreement, the mortgage lender schedules an appraisal. The appraiser – chosen by the lender – is a licensed professional with no connection to the buyer or the seller.
During the appraisal, the appraiser evaluates the home’s interiors and exteriors, along with the surrounding area. The appraiser may also inspect certain parts or areas of the property based on the type of mortgage loan and their appraisal criteria. FHA-backed loans, for example, have stricter requirements when it comes to home appraisals. Among the requirements that homes must meet are undamaged exteriors, reasonable property access, and a working heating system.
After the appraisal is completed, the mortgage underwriter will review your loan file and the appraisal report. If the appraised amount is approximately the same as the purchase price, the loan can be finalized and you’ll be one step closer to home ownership.
Learn more about the Las Vegas home appraisal process with me, Anthony Romeo. Get in touch with me today by calling 702.353.6759. You can also send me an email at Anthony(at)RomeoLuxury(dotted)com. I look forward to hearing from you!