What’s an Appraisal, Anyway?

Man appraising home

A home appraisal is a report completed by a third-party licensed appraiser that provides an opinion of value for a property. The purpose of the appraisal is to determine that the price you agreed to pay for the home is supported and to make sure the home is habitable in its current state. The appraisal is done to protect you as the buyer and us as the lender. The lender orders the appraisal after the initial disclosures are signed and it can take up to two weeks for the appraisal to be returned.

The appraiser gathers information about the home from a variety of sources (MLS, assessor, public records) and then visits the property to take photographs for the report and to make sure that the home’s features all match up with the information assembled. The appraiser arrives at the opinion of value by comparing the property and its features to similar homes in the neighborhood that have sold in the past 12 months.

The property requirements of a Conventional appraisal will differ slightly from a VA, RD, or FHA appraisal. However, the appraiser’s approach to value is the same regardless of loan type and the appraiser’s final opinion of value will be exactly the same regardless of whether the appraisal report is Conventional or FHA/VA/RD.

The appraiser may need to require a repair if there is a major deficiency or safety issue. Please keep in mind the appraisal is not a home inspection. A home inspection is much more thorough as to the detailed condition of the home.

Examples of major deficiencies/safety issues:

  • Chipped/peeling paint on the exterior (all buildings, even sheds/outbuildings)
  • Roof having less than 3 years of life remaining (curled/missing shingles)
  • Hot water release pipe greater than 6” from the floor
  • Missing handrails

After the home appraisal is completed, the lender’s underwriter performs a thorough review of the report to confirm the value and condition of the home are acceptable.

To learn more about the appraisal process and how it affects mortgage rates, contact RMN today.