So far this year, mortgage rates continue to hover around 3%, encouraging many hopeful homebuyers to enter the housing market. However, there’s a good chance rates will increase later this
Dated: August 30 2020
What is a Home Appraisal?
When you buy a new house and you obtain a loan on the house, your bank will order an “appraisal”. The appraisal is a determination of home value. This is done by an objective third party, called an Appraiser. Bear in mind a few things:
Your bank does NOT get to pick their Appraiser of choice. They will be ASSIGNED an appraiser.
As of August 2020, appraisals are running 2-3 weeks behind. If your bank orders an appraisal, you may not get that back for 3-4 weeks.
What happens if my home “doesn’t appraise”?
If someone says their home “didn’t appraise”, what they mean is that “their home did not appraise for the full sale price”. Therefore, the bank will NOT lend the full amount of money on the home. What happens next?
**Overwhelmingly (99% of the time), the home seller must drop their price to the value of the appraisal.
If the home seller refuses to do that, most home buyers have to back out of the contract. If the contract is “contingent (dependent) on an appraisal”, the buyers WILL get their earnest money back. In some very rare cases, buyers will agree to pay above appraised value for a home by putting down additional cash. However, this is NOT very common. Most people simply don’t have enough money to do that.
What does the Appraiser look at to determine value?
There are various types of calculations that can be done, but, essentially, your appraiser compares your homes to other similar homes that have recently sold. Your appraiser looks at factors that include home size, home age, lot size, number of bedrooms and bathrooms, “finishes” like counters or flooring, interior or exterior condition, and home improvements such as renovations or additions. They pull available “comps”, or comparable similar properties that have sold in the area within the last 3-12 months. They then determine the value of your home based on how it compares to these recently sold properties.
Why is getting an appraisal important?
An appraisal is important because it protects your investment. It's there to ensure that banks do not lend more on homes than the homes are actually worth. It also protects the buyer so that they don't pay more than the home is actually worth.
Who ARE these so-called Appraisers??
In Missouri, Appraiser Applicants must be state-licensed. They must (1) complete 75 hours of qualifying education, (2) pass the State License examination, (3) work as a Trainee under a certified real estate appraiser for a minimum of 6 months, and (4) complete a minimum of 1,000 hours of real estate appraisal experience under a certified appraiser. During this training period, the applicant must complete 150 credit hours of classes AND pass the closed-book test on each of 7 appraisal education areas.
SOURCE: Missouri Division of Professional Registration, Real Estate Appraisers Division at https://pr.mo.gov/appraisers-requirements-application-forms1.asp
Read more on how low appraisals are impacting home sales next week!
Michelle is a native of Southwest Missouri and has twenty-five years of experience in selling real estate in the greater Springfield area! Michelle specializes in all price points, including new const....
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