For one, a home appraisal is required by the lender, while a home inspection is recommended but not mandatory. Because of this, you are responsible for finding a home inspector and scheduling the inspection. Meanwhile, the lender will schedule your appraisal for you.
Another way in which the two differ is in their purposes. As a result of this, their processes are different. In the most basic terms, a home inspection dives more into the functional parts of the home, using special equipment to find problems that may not be seen by the naked eye. An appraisal does a more surface-level review of the home and involves research on similar, recently sold homes in the area. Appraisals must be conducted by a licensed, third-party appraiser who has no connection to the buyer, seller or lender.
That way, all parties can be sure the determined market value is fair, unbiased and free of any influence from any party that could benefit.
The lender usually orders the appraisal, but the borrower is the one who usually pays for it. The appraisal fee is an upfront, out-of-pocket expense that will not be refunded if either party fails to move forward with the sale. Call our Home Loans Experts at to begin your mortgage application, or apply online to review your loan options.
However, the cost of an appraisal depends on a few factors, including:. These factors affect the amount of time, effort and work that go into the appraisal, which is what ultimately influences the price the borrower will pay.
For example, a larger home or multiunit property has more space to walk through and assess. A home that has unique characteristics makes it difficult to find comps because those features often make the home one of a kind. If the home is in a remote area with nothing around it, the appraiser may have difficulty finding any other home in the area, let alone one that is similar.
This may require deeper research, which takes more time. In general, the home appraisal process can take up to a week or more to go from the date of inspection to the appraisal report. Before the lender can order the appraisal on a new property, you must put an offer in on the home, have it accepted and sign a purchase agreement.
After that, the appraisal process can begin. This process starts with the lender ordering the appraisal. Once the appraisal is ordered, an appraiser will come to inspect the home. Depending on the type of loan you get, your appraiser will inspect certain parts of the home for specific reasons.
Many of the issues they find during the appraisal must be resolved before the buyer moves in. Once the appraiser completes their inspection, they will review comps to come up with the fair market value of the home. While a homebuyer can hire an independent appraiser, the valuation of the home would be unofficial. A better use of the money would be getting a home inspection, she says.
The appraiser focuses on determining the value compared to similar homes in the area, plus the condition of the actual property. The inspector will run the dishwasher to confirm there are no leaks and it cycles through the stages as expected. How We Make Money.
Ellen Chang. Written by. Ellen Chang is a freelance journalist who is based in Houston. For Bankrate, Chang focuses her articles on mortgages, homebuying and real estate. Her byline has appeared in …. Edited By Deborah Kearns. Edited by. Deborah Kearns. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity.
Key Principles We value your trust. But the range can be much larger. The cost of an appraisal depends on several factors, including the location, size, and condition of the home.
Appraisal prices generally increase with the size of the home. They tend to be more expensive in urban areas, but you might also pay a premium if your home is in a difficult-to-access location. In most cases, the bank requires an appraisal as a part of the mortgage process. As a result, the buyer is responsible for that cost, as they are for other closing costs. While the buyer is typically required to pay for an appraisal as a part of the mortgage process, it can sometimes be in the best interest of the seller to pay for an appraisal before they put their house on the market.
For example, Fitzgerald has seen an appraisal return higher than what a home has sold for. When this happens, the seller could have paid for an appraisal before listing their home and potentially make more from the sale, says Fitzgerald. Homebuyers may run into a problem if the appraised value of the home turns out to be lower than the accepted offer price.
The buyer and seller can renegotiate to lower the sale price of the home. The buyer can come up with the difference between the appraisal value and purchase price. If the buyer has an appraisal contingency , they can walk away from the deal. When you refinance a mortgage, you take out a brand new home loan to replace your existing one.
In many ways, the process of refinancing a mortgage looks quite similar to the initial mortgage. Depending on the situation, that may or may not include a home appraisal.
In many cases, homeowners might be eligible for an appraisal waiver. These waivers, granted by Fannie Mae and Freddie Mac, allow certain mortgages, including refinance loans, to skip an appraisal. Replace dim light bulbs with brighter ones. Hang mirrors to maximize natural light and give the illusion of a bigger room. Pull furniture away from the wall. Do whatever you can to make your home look bigger and brighter.
If you or your agent are aware of recent sales that could be considered in the report, provide them to your appraiser. Search public records for homes with a final sale price close to what you asked for your home. You can present this list to the appraiser when they arrive at the home. A low appraisal value could keep you from refinancing, but a high appraisal value means more equity for you — which could mean more cash out or better loan terms. Here are some ways to up your chances of a high appraisal value.
Your home is full of memories, which may give you blind spots when it comes to defects in your home. Have a friend or family member examine each room in your home and point out areas that can be improved. Sometimes, a new set of eyes is just what you need. A thorough decluttering will help each room look more put-together.
Did you get a new air conditioner? Replace the windows? Add new landscaping? An appraisal determines the fair market value for a home. A professional appraisal is done by a licensed third-party appraiser who assesses the interior and exterior of the property, researches similar homes in the area and gives a final report.
Be sure to spruce up your home to make it look more appealing to an appraiser. If an appraisal comes in low, buyers and sellers both have options. A buyer can renegotiate the sales price, and a seller can lower the home price or request another appraisal. While a client or seller can request a new report, that does not mean that a new report will be ordered or issued upon that request. Appraisals are beneficial for everyone involved in the home buying process: For buyers, a home appraisal ensures they are paying the current fair market value.
For sellers, an appraisal helps them price their home competitively. For mortgage lenders, an appraisal provides proof that a home is valued at the proper level to approve a mortgage. Ready to apply for a mortgage or a refinance of your current mortgage? Hanna Kielar is an Associate Section Editor for Rocket Mortgage focused on personal finance, recruiting and personal loans. She has a B.
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