There are a lot of moving pieces once you’re under contract, whether you’re selling a home or buying a home. You’ve got an accepted offer. You’ve had the home inspection. You’re out of attorney review. You just need to show up at the closing table now, right? Not necessarily. Unless it’s a cash purchase, the home will need to undergo an appraisal.
But, wait, what IS an appraisal?
When you get pre-approved for a home loan, the bank looks at your personal finances and agrees to give you a set amount of money. Before they can give the final approval for a loan, they want to ensure that you’re making a sound investment. An appraisal is a way for them to check this. They’re looking to make sure that the agreed upon purchase price of the home, and the value of the loan, match the market value of the home.
The appraisal is not subjected to your individual motivations or what the seller thinks their home is worth. Appraisals are conducted by well-educated and trained individuals. They are either licensed or certified to determine the value of a home fairly, objectively and without bias in the state where the property is located.
Each state has different rules and regulations on how to become an appraiser, but the overall process is the same. All states require you to start your career as a trainee appraiser before becoming a licensed residential appraiser. In order to become a trainee, you need to complete and pass specific coursework giving you a solid foundation to become a real estate appraiser.
An appraiser does not look at the general cleanliness of the home or its’ updated decor. They look at your home’s physical characteristics (age, square footage, the number of bedrooms and baths, lot size, location, view) as well as the home’s observable condition. Then they take these items and compare them to closed homes in the area.
The appraisal is usually the next to last step in the contract to close process. It precedes getting the “clear to close’ from the bank that all terms of the mortgage have been approved. You’re almost to the finish line!