What is the appraisal process? An appraisal is a written estimate of a property’s market value completed by an appraiser. The value is based upon a market analysis of the prices of recent sales of similar properties in the area and the property’s physical condition. Usually, this requires an interior and exterior property inspection. Typically, the day that the Bank gets the contract for the sale of your home, they will generally order the appraisal. However, you should do everything you can to get the Lenders information to follow up and make sure this very important step happens.
Lenders use your appraisal to determine your loan amount. Your appraisal will be completed shortly after you request your mortgage. It will usually take about one week for the report to get back to the lender and anyone else involved in the transaction. If you have been pre-approved for $200,000 and you have a sale pending on a house that just appraised at $195,000, you will only get a loan for the $195,000 (assuming the appraisal is less or equal to the final sales price).
If the appraised value is higher than the sales price, there is no impact to you. When the property appraises for a lower value than the sales price, the lower appraised value is used to determine your loan amount. To complete the sale, you may have to increase the down payment to make up the difference between the appraised value and the purchase price or the seller may have to come down and settle on terms equal to the appraised value.
When we come to terms with the seller for the home that you have chosen, we will immediately forward the binding contract/ratified contract to the lender that is helping you obtain your financing/mortgage. In most instances, your lender will require you to pay for the appraisal process in advance (POC-Paid Outside of Closing). This fee is calculated into your overall closing costs and will typically run between $350.00 and $450.00. After the lender orders the appraisal through one of their qualified appraisers, we will make sure the appraiser is at the property for the initial appraisal. When your lender orders the appraisal to the time the appraiser generates and forwards the report to your lender, the overall time frame will be between one to two weeks. This is one of the most important steps involved throughout the home buying process, because your loan amount is at stake with the agreed contract terms and conditions.