What Exactly Are Appraisals and How Do they Work?
Today I’m excited to talk to you all about appraisals. We’ll go over what they are, how they work, and how they affect the purchase of your home.
Every time you write a contract, there will be a clause in saying that a home has to appraise in order for the sale to go through – that is – unless you are writing an all cash offer. These aren’t required with every type of financing, but definitely are for FHA and VA loans.
“Appraisals are one person’s opinion of value.”
If the home doesn’t appraise out to at least the value it was agreed to be purchased for, you have the option to void the contract, negotiate the price down or come up with the difference in cash. An important thing to remember about appraisals is that they are one person’s opinion on the value.
There is math and there are formulas involved in coming up with an appraised value, but there is some art to it as well. By using comparable homes, an appraiser will determine whether your house is priced fairly. If a new house sells the next day and it’s a more comparable home to yours than another one was, your home will then probably appraise a little differently.
Even though you’ve had a home inspection, the appraisers have a responsibility to look for certain things and areas where improvements can be made. Sometimes you might get a conditional appraisal that says your home will appraise for x amount if you fix a certain problem.
I hope this helps shed a little light on what an appraisal is and how it factors into your home purchase. If you have questions or need help with buying or selling, I am here to help!