When a potential home buyer applies for a mortgage, the value of house must be determined. The lender will always require that the property be appraised by an appraiser they approve of, so they order an appraisal.
Working through a pre-approved appraiser will help to assure greater consistency with appraisals and the buyer will also receive the benefits of having a certified and licensed professional determine the value of house they wish to buy.
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When it's possible, you may want to be the one who selects the appraiser. On this page I will explain why and also teach you what to expect when getting an appraisal done.
It is the responsibility of the borrower to pay for the appraisal even though the lending institution will likely order an appraisal. It typically costs around $300, but that will depend on the value of house in question. This amount will be added to the cost of the mortgage at closing.
Order An Appraisal - Determine Value Of House
A good reason why you want to be the one that orders the appraisal is because the appraiser is then working directly for you and not the lender. In my opinion this keeps the transaction honest. Not that an appraiser would be dishonest, but if they know you are the buyer, it could prove helpful.
You do not want the sellers real estate agent to order an appraisal because then it could be weighted towards the high side. Since the seller wants as much money as possible on the sale of the house, I think you can see the reason not to allow them to be the ones to order it.
The lender in most cases does not care who orders it, they just need it to determine value so they can make a loan. So if you have already been pre-approved for a mortgage as I recommend on this website why not get involved? This could help you in the long run save money.
Here is what you can expect to be included on the appraisal report:
Explanation of what the appraiser used to determine the property value
The condition and size of the home along with permanent fixtures and a complete description of any materials used and types of improvements that have been made
If there were any structural problems like cracked foundations or wet basements there will be statements about these
Information about the area surrounding the house which will include whether there is rural acreage or newly established development and so forth
Recent market trends for the area will also be noted when this will affect the value of house
The appraisal will also be supported by a comparative market analysis
Sketches, photographs and maps will also be included
When an appraisal is ordered by you or your bank orders it, the valuation will not only be of the home itself but of any permanent structures and the land it is sitting on. The lending institution will use the value of house to determine the amount they are willing to loan on the property.
Lenders will be conservative when it comes to placing a value on the property. They take the appraisal and run it through their own database to cross check the appraiser. Sometimes they challenge the value if they feel it is too high. They like it when the value comes back higher that the sales price because it protects their investment.
SO as the first time home buyer, you want a good, fair and proper value placed on the home. Not too high, not too low.
If you believe the value of house is underestimated, you should ask to see the appraisal, and may ask for a second appraisal if you feel the appraiser has missed something that will impact the final appraisal. When maintenance issues or repairs are the problem, the seller may be willing to make corrections and you can then order an appraisal to be completed a second time.
Even though the most common reasons to order an appraisal is for a real estate or mortgage transaction, there are other reasons that a report such as this would be ordered. They are also used to settle an estate, for insurance reasons, or for just compensation.
So don't get worried when your lender wants to order an appraisal. This is a normal part of the transaction. I just think it is good if you the buyer can be involved in the process from the begining. After all, you're the paying customer. No money moves until you approve every step of the deal.
Would you like to know what you can do to help the appraiser? Follow the link below to find out.
Understanding how credit scores work is the beginning of the mortgage process. Know your credit scores before you apply for a mortgage. Many free details found on this page.