When you're buying a NC Mountain Homes for Sale using a mortgage, refinancing your existing mortgage, or selling your home to anyone other than an all-cash buyer, the home appraisal is a key component of the transaction. Whether you're a buyer, owner or seller, you'll want to understand how the appraisal process works and how an appraiser determines a home's value.
What Is a Home Appraisal?
An appraisal is an unbiased professional opinion of a home's value. Appraisals are almost always used in purchase and sale transactions and commonly used in refinance transactions. In a purchase and sale transaction, an appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location and features. In a refinance, it assures the lender that it isn't handing the borrower more money than the home is worth.
Lenders want to make sure that homeowners are not over borrowing for a property because the home serves as collateral for the mortgage. If the borrower should default on the mortgage and go into foreclosure, the lender will recoup the money it lent by selling the home. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.
The Appraisal Process and How Appraisal Values Are Determined
Because the appraisal primarily protects the lender's interests, the lender will usually order the appraisal. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified (as required in all 50 states) and be familiar with the local area. Federal regulations state that the appraiser must be impartial and have no direct or indirect interest in the transaction.
A property's appraisal value is influenced by recent sales of similar properties and by current market trends. The home's amenities, number of bedrooms and bathrooms, floor plan functionality and square footage are also key factors in assessing the home's value. The appraiser must do a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property's value, such as needed repairs.
The report asks the appraiser to describe the interior and exterior of the property, the neighborhood and nearby comparable sales. The appraiser then provides an analysis and conclusions about the property's value based on his or her observations.
The report must include a street map showing the appraised property and comparable sales used; an exterior building sketch; an explanation of how the square footage was calculated; photographs of the home's front, back and street scene; front exterior photographs of each comparable property used; and any other information, such as market sales data, public land records and public tax records, that the appraiser uses to determine the property's fair market value. An appraisal costs several hundred dollars, and generally the borrower pays this fee.
What Homebuyers Need to Know
When you're buying a home and you're under contract, the appraisal will be one of the first steps in the closing process. If the appraisal comes in at or above the contract price, the transaction proceeds as planned. If the appraisal comes in below the contract price, however, it can delay or derail the transaction.
Chances are neither you nor the seller wants the transaction to fall through. As the buyer, you have an advantage in that a low appraisal can serve as a negotiating tool to convince the seller to lower the price so the transaction can move forward. The bank won't lend you or any other prospective buyer more than the home is actually worth. While appraisals help buyers avoid overpaying for homes, a seller may feel that a low appraisal is inaccurate and be reluctant to drop the price. If a bad appraisal is standing between you and your home purchase, look into getting a second opinion via a second appraisal. Appraisers can make mistakes or have imperfect information.
What Home Sellers Need to Know
As a seller, a low appraisal, if accurate, means you will have to lower your home's price to get it sold. Lenders won't approve loans for more than a home is worth, and holding out for an all-cash buyer who doesn't require an appraisal as a condition of completing the transaction is unlikely to net you a higher sales price. No one wants to overpay for a home.
Unfortunately, recent distressed sales in the surrounding area can lower your home's appraisal value. If you feel that your home's value has been dragged down by the sales prices of nearby foreclosures and short sales, you may be able to convince the appraiser that your home is worth more if it's in significantly better condition than those properties. Sellers should also know that federal guidelines (intended to eliminate the inflated appraisal values that contributed to the housing crisis) sometimes cause appraisals to come in below fair market value and can make low appraisals difficult to challenge.
When the appraisal value is lower than expected, the transaction can be delayed or even canceled. Regardless of which situation you encounter in your home buying, selling or refinancing experience, a basic understanding of how the appraisal process functions can only work in your favor. A1 Mountain Realty will assist you in finding an reputable appraiser and go over the details when the appraisal comes in. Buying a home is a major investment, let A1 Mountain take some of that stress and worry away. We will refer sellers to reliable professionals to get the repairs made after the reports come in. We want your home sold and we want you to get the most out of your home that is possible.
A1 Mountain Realty offers many options for you and your family. Our mountain property offers a variety of life styles to please everyone. Whether you’re looking for a Ashe County family vacation home or a getaway from the hustle & bustle of city living you can find it here. From NC Mountain Luxury Homes to NC Mountain Log Home, large tracts of NC Mountain Land, NC Mountain Lots and everything in between. Let A1 Mountain Realty be your guide for all your buying or selling real estate needs. View all our listings from our website www.a1mountainrealty.com or do a MLS search for any type property in the High Country.