Whether you are selling or buying a house, a home appraisal is going to be one of the factors involved in the process. These mean different things on the part of the seller and the buyer. In this post, we’ll be going over what a home appraisal consists of and what you should expect on either side of it.
What a Home Appraisal Means for the Buyer
You wouldn’t purchase a home without knowing its condition, or being certain of its true market value. You will want to inspect it first. That said, you’re probably not an expert on everything involved in a house, or how to determine its market value. Do you know how to look for plumbing, electrical, or foundational damage? How about flooding issues, or damage that is likely to occur in the future?
There are two main ways of assessing the quality of a home you are considering buying. The first is a Sellers Disclosure. This is a document that the seller provides that is supposed to outline all damage or problem areas in the home, so you aren’t taken by surprise by them after the sale’s been made and you’ve moved in. However, like you, the seller probably doesn’t know how to do a full, comprehensive evaluation of the house.
Furthermore, determining these factors by either party presents a conflict of interest. The solution is an objective evaluation from a third party – a home appraiser.
For this reason, the home appraiser is hired by the mortgage lender. That said, the buyer is the one who pays for the cost of the appraiser. These costs are generally added to the overall closing costs and will be paid after you purchase the home.
The home appraiser determines the condition and true market value of the house by assessing the:
- Overall condition, including its foundation, plumbing, and electrical systems
- The amount of damage that is likely to occur in the future
- Its square footage, amenities, and location
What a Home Appraisal Means for the Seller
As the seller you are not required to pay the costs of the appraiser. They will simply come in and inspect all of the factors listed above. Information they find during the appraisal process is going to determine the true market value of the home that you’ve listed.
During the process, the appraiser is likely to find issues that you didn’t know about. The cost of these repairs can be negotiated afterwards to find a mutually agreeable option.
Successful negotiations mean being reasonable. It is understandable that major problems like a leaking roof need to be covered before you can sell the house, but you shouldn’t have to worry about some cracked siding.
In these instances, it’s usually the best interests of everyone to default on credit. This will prevent the closing date from being unnecessarily prolonged. As the seller, it’s in your best interest to put the repair costs in escrow so that the buyer can make the repairs themselves.