If you have ever bought a house or are in the process of buying a house, you are probably aware that you will need a home appraisal. However, many people have some misconceptions about how the appraisal process really works.
Here are some of the common misconceptions about real estate appraisals.
Misconception #1: The purpose of the appraisal is so a buyer doesn’t pay too much for the house.
Truth: The appraisal is to protect the lender so they don’t lend too much money on an overpriced property. That is why the appraisal is done before your loan is approved.
Misconception #2: Appraisers use an exact formula to determine the value of the house.
Truth: There are many different things that factor into the home appraisal. Each appraisal will have different circumstances that will determine the value of that particular home. Such as the location, how close it is to schools, the size of the lot, the condition of the home and the market comparables for that area etc.
Misconception #3: A realtor’s input about the condition of the home will influence the appraisers final decision about the value of the home.
Truth: The appraiser’s final determination about the value of the home cannot be influenced by the realtor.
Misconception #4: A clean home will improve the appraised value of the home.
Truth: An appraiser does not look at the cleanliness of a home. However, they will look for signs of neglect.
Misconception #5: Anyone who knows a little something about houses can be an appraiser.
Truth: Federal law requires states to have minimum standards and licensing practices in place for all appraisers. In some states an appraiser will have to take several courses, pass an exam and complete thousands of hours of on the job training before they will be issued their license.
Misconception #6: Appraisers are not obligated to disclose every known home defect to the buyer.
Truth: If the home will be insured by the FHA, then the appraiser must disclose all possible defects to the buyer. However, if the mortgage is a non-FHA mortgage, then the appraiser has no obligation to disclose his findings.
Misconception #7: The appraisal is the same thing as the home inspection.
Truth: The appraisal is formulated for the lender. The home inspection is a report of the homes condition that is formulated for the buyer.
Misconception #8: If the appraised value comes out to be lower than the sale price of the home the loan will not be approved.
Truth: There are several ways to overcome a low appraisal. The seller could lower the price of the home, the buyer could put down a larger down payment. Talk to your realtor about the other options that are available for overcoming a low appraisal.