What You Need To Know About Real Estate Appraisals
Everyone has to figure out their property’s worth before selling, regardless of whether you live in a trailer or mansion.
A real estate appraisal is crucial to getting maximum value when selling your home. Without one, you might leave hundreds of thousands of dollars on the table. In this guide, we walk you through the key information you need to know before getting your real estate appraisal. Including:
- The difference between a home appraisal and home inspection
- When appraisals are required
- What’s in an appraisal report
- How much an appraisal costs
What’s the difference between an appraisal and a home inspection?
Frame this another way.
An appraiser is like a girl you are trying to date: she looks to see what you’re worth compared to the rest of the market by judging your appearance and your wardrobe.
A home inspector is like a doctor: they see everything that is wrong with you (from your cracked foundation to your leaky roof) or they give you a clean bill of health.
Basically, what this means is that an appraisal is an educated guess of your home’s value compared to the market whereas an inspection is like a “check-up” where professionals see if your home is in good enough condition to hit the market.
What does the appraisal process involve?
An appraiser inspects your home’s features and square footage looking for all the factors that determine the market value.
They will go through every room taking note of all the necessary details to compare it to other homes.
Pro Tip: If any of your home’s features are P. Diddyesque, they will add value.
What's in an appraisal report?
- Specific details with a side-by-side comparison of similar properties for sale
- An evaluation of the market performance in your area
- Issues that negatively affect the property’s value
- Descriptions of any significant problems such as water damage or cracks in the foundation
- An estimate of average sales time for similar homes
Are appraisals required?
Yes, appraisals are required, and here's why:
1) Lenders want to protect their investment. Any home that requires a mortgage is appraised to ensure if a buyer defaults, the bank won't lose its shirt.
Let's be real here. The banks always win. They are a necessary tool unless you can pay for your house in cash.
2) Appraisals are a solid idea for all property transactions.
Buyers and sellers want the best price. Appraisers use their unbiased training and experience to give an accurate value.
Who is the appraiser, how are they hired?
Appraisers are highly qualified. They have over 100 hours of coursework and over 1,000 hours of interning before being licensed.(1)
Appraisers must be an objective third party with no financial interest or personal connection to the buyer or seller.
The mortgage lender hires the appraiser through a third party.
Is the appraisal the final word on a home’s value?
It is possible the appraiser missed something.
Your real estate agent can talk with the appraiser to determine why they made decisions that you disagree with.
If your perspective on the home value differs significantly from the appraisers you can challenge it.
Ensure you have valid arguments about why the appraisal is wrong.
An awesome real estate agent will be ready to help you with this.
How often do you need to get an appraisal?
An appraisal is valid for 6 months.
Real estate values continually change. In rapidly changing markets, some lenders may only use an appraisal for 3 months.
Is a Zillow Zestimate like an appraisal?
Absolutely not!
A Zestimate is not a substitute for an appraisal. Using a Zillow home value is one of the worst ways to value a property.
It is an automated tool that is often wrong by tens of thousands of dollars.
Don’t take my word for it. Zillow admits this even if they put a positive spin on it.(2)
What does an appraisal cost?
An appraisal costs between $300-600 dollars depending on the size and complexity of the property.
Are appraisal standards rigid?
Real estate appraisals aren't guesswork.
There are rigid standards that every licensed appraiser must follow.
Lenders trust appraisers to protect them from financial risk. You trust appraisers to give you a fair market value.
Let’s Recap!
- An appraisal is in the best interest of all buyers and sellers and is a lender requirement for mortgages.
- Real estate agents know the correct home price is vital for sale.
- Pricing issues are the number one reason why homes don’t sell.
- Don't stay in the dark, get your home appraised today.
Sources
- “How to Become a Real Estate Appraiser in 7 Steps” https://fitsmallbusiness.com/how-to-become-a-real-estate-appraiser/
- Zillow Zestimate https://www.zillow.com/zestimate/
