How Do Appraisals Work? Everything You Need to Know

Appraisals serve a crucial role in regulating home prices in America, and professional appraisers ensure fair home valuations throughout the country. Appraisers are also held to high standards and must pass a rigorous licensing process to become certified appraisers.

However, the appraisal industry wasn’t always held to this high standard. In fact, many of the actions from unscrupulous appraisers in the late 2000s led to inflated home values and were a factor in causing the real estate crash and Great Recession in 2008.

Understanding how the appraisal process works is crucial if you want to buy a home or invest in real estate. This article explains how appraisals work, how much they cost, and the things appraisers look at when determining a home’s value.

Appraisal Basics

If you’re purchasing a home with a mortgage or refinancing your property, your lender will most likely require an appraisal to get an understanding of your home’s value. 

Some instances where you may get an appraisal waiver include:

  • If the property was already recently appraised
  • Streamline refinances
  • Refinances with low LTVs and no cash-out

Assuming you need an appraisal for your sale, purchase, or refinance, only certain people are qualified to give you an estimate of your home’s value. Professional appraisers abide by the Uniform Standards of Professional Appraisal Practices (USPAP) and use a variety of factors when determining a home’s value.

What is used to determine the home’s value?

Appraisers consider several factors when determining a home’s value. First, they look at comparable properties (or “comps”), which are homes in the same area with similar features to the subject property. Looking at recent sales of similar homes is typically a good indicator of your home’s value.

Comps are useful to appraisers for many reasons, however, they do not tell the whole story. Some properties have additions like a remodeled kitchen, stone and mason work, or renovated bathrooms which typically increase the value of a home. In other words, the amenities and features inside the home also play a key factor in the appraisal process.

Appraisers also look at market conditions when evaluating a home. While inflation is at record highs as of August 2022, appraisers shouldn’t issue inflated home values when appraising properties during periods of inflation. This could be especially damaging to the market since home inventory is low. Inflated home values would further drive up prices and price nearly all first-time home buyers out of the market.

Appraisal costs

No two appraisals are the same since all homes have unique features that may influence their value. Several key factors affecting the cost of the appraisal include:

  • The home’s square footage
  • The number of bedrooms and bathrooms
  • Any additions, renovations, or remodels
  • Competition among appraisers

While appraisal costs vary significantly depending on your area, most Americans should expect to pay between $450 to $700 for a standard appraisal. However, large homes with unique features in high-cost areas may require appraisals that cost over $1,000.

Find out why Kaya Homes is the leader in Long Island real estate and are your go-to realtor in the Lynbrook, Oceanside, Malverne, Hewlett, Valley Stream, East Rockaway, Woodmere, Cedarhurst, Hewlett Harbor, and Freeport area.

Mon, 29 Aug 2022 19:48:26 +0000

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