You’ve completed your loan application and submitted it to your mortgage broker. Now you’re anxiously awaiting the home appraisal. What is an appraisal anyway and what does the appraiser mean to you and that mountain of paperwork you just completed?
Early in the loan process, your personal/financial approval is accomplished fairly early and commitment by the lender hinges on a satisfactory appraisal. In other words, the lender wants confirmation that their investment is covered by the property should the applicant default.
An Austin home appraiser’s role in the lengthy loan process is to provide an objective, unbiased opinion of value to the lender. Appraisers work for the lenders, not the owners, buyers, or sellers. Although the owner, buyer, or seller may be asked to pay for the appraisal, the appraiser works for the mortgage lender.
And don’t confuse a home appraiser with a home inspector. They do not test appliances nor for leaks in the roof or any other typical inspection tasks. Neither do they provide a comparative market analysis (CMA). Real estate agents use CMA’s to determine a correct asking price. Nor is an appraiser an assessor. An assessor determines the value of properties in an area for property tax purposes. An appraiser is a real estate professional who specializes in providing opinions of value (appraisals). Texas requires Austin home appraiser be State licensed and certified. They must pass a State test and have completed basic education and continuing education.
Austin home appraisers determine the value of properties for many purposes and their appraisal report is the only report a lender considers when determining whether or not to lend money. You will need an appraisal for:
- Home purchases
- Cash-out refinancing
- Home equity loans and
- Home improvement loans
Appraisers use two common approaches to the appraisal. A sales approach includes details about the property along with comparisons of probably three very similar properties. It evaluates the area’s overall current real estate sales potential and estimates the properties market value.
The cost approach is used most often for new properties and the appraiser estimates the home’s replacement cost if it were destroyed.
So once the appraiser establishes the value of your home and documents his findings, what will you see on your appraisal?
- Property details with comparisons of three similar properties within close proximity to the home.
- An evaluation of the general real estate market – again – within close proximity to the home.
- Comprehensive accounts regarding issues the appraiser feels negatively impact the property’s value.
- Information regarding seriously defective features, such as a crumbling foundation.
- An estimate of the probable sales time for the property.
- The type of area the home is in, i.e., a development, stand-alone acreage, and the like.
And what do you do if your appraisal comes in low? Don’t panic. Should the document reveal problems, most are correctable. Talk with your broker. Your broker can work through the issues with you and find a workable resolve. Among some of the most common resolutions:
- The potential buyer can make up the difference in the low appraisal in cash as a down payment.
- The potential seller can decrease the asking price.
- The buyer can apply for a second mortgage for the difference.
- Your agent can provide a list of comparable sales.
- If refinancing, the borrower can provide receipts of permanent upgrades to the property.
- Or if all else fails, the buyer can cancel the transaction.
When the Austin home appraiser arrives to conduct your home’s appraisal, ask questions so you have an understanding of this element of the loan process. If you’d like more information, please check: