Home Owners, What Is House Appraisal ??? What Is The Cost And Is It Important?
Wednesday, December 2nd, 2009 at
3:32 am
we’re purchasing a house and it’s in escrow. the lender is charging $500.00 for the house appraisal, why is it so much. can we get it cheaper than that. also do they tell you what is wrong with the house if in case it does have plumbing or electrical problem. what other problems or questions should we ask before closing the deal. thanks!
Tagged with: Appraisal • Cost • Home • House • Important • Owners • What
Filed under: Articles-Home Repair
A house appraisal is a process where a certified appraiser checks into other similar properties that sold in the neighborhood within the last six months. Then the appraiser identifies what is the same about the houses and what is different (3 bedroom vs. 4 bedroom and stuff like that) The use that data, and the amount those other houses sold for to determine what your house should be worth. They do this to protect both you the buyer, and themselves, the lenders.
Most appraisers are chosen by the lender (even though the buyer typically pays). The lenders have preferred appraisers, because they know if the appraiser is honest, ethical, etc, and that appraiser knows what the lender is looking for.
In some cases, such as VA or FHA loans, the appraiser has to have extra certification, which typically makes an appraisal cost more.
The $500 is the norm for an appraisal fee. The purpose of the appraisal is to verify the fair market value of the house is what you are paying for. It could turn out the house is either worth more or worth less. In either case, your lawyer will help you determine the next steps if that does occur.
A house appraisal does not look at plumbing or electrical. For that you need to get an inspection done and get a Certificate of Occupancy from the town.
Other things to check:
- Make sure the Title for the house gets researched. Your lawyer should help you with this.
- If this is an old house, ask about the types of repairs that have been done. Has there ever been a fire, a water leak, high levels of radon?
- You should find out about things like if the city or town is responsible for cleaning the snow,etc.
- Make sure you understand precisely where your property line is and where the town or neighbors property starts
- Ask to see the Certificate of Occupancy
- You should also ask about PMI. This is an insurance premium that you must pay if your loan to value ratio is more than 80%.
- If there is any kind of finishing work that the owner needs to do, make sure YOU create the list and make that part of the contract if you can.
Hopefully that helps.
The lender needs to know that they will get their money back if you default on the loan….so they need an appraisal.
Why is it so expensive?…shop around for a new lender. Mine just charged $70 a couple of weeks ago.
Good luck
That is insane for an appraisal. I paid $300. The lender pays someone to go to the home and compare it to fair market. Negotiate on this one. BTW, I live in CT where it is expensive.
Inspections are there to check for problems. Generally they do not deal with electrical (unless it is discussing exposed wires or what the amps are).
Yes it is important when you’re either selling or buying a house. It does cost quite a bit because someone has to come in and assess every aspect of the house…the structural soundness of the plumbing, heating, the area it’s in…everything.
And yes, there’s every possibility that you can have it done for less money but the laws regardig what the lender’s rights are can vary from state to state. Since the lender is the one giving you the money, they may have every right to determine for themselves that the house is worth the money you’re trying to borrow. They may also be legally bound to accept an official appraisal from an outside appraiser if that’s the route you decide to take.
You may also be able to find another lender who will charge less for a home appraisal.
You have to find out about the laws about this in your area.
Nope - You must have the appraiser that the bank chooses, it’s someone that they trust.
This helps you because if your home does not come up to the value, then they will not give you the loan.
If your purchase is conditioned upon you receiving the mortgage, this saves you if the home is overpriced….so it works for you, not against you.
That amount is average! It is too late now for you to ask questions, as the home is in escrow.
The house appraisal is to verify how much the house is worth. So, that you are not overpaying for it. A lender will only lend a certain amount on the house and if the seller is asking more than an appraisal, they may deny the loan. For example if a house only appraises for $50,000 and the seller is asking $100,000, there has to be a justifiable reason. If the bank just gives you the money and you default, the lender would never ever come close to getting what was owed.
Talk to your lender. Depending on the state you are in, you may not have to use the appraisal company they are using. You can call any outside appraisal company to appraise the house for you. Ours cost $250. Some are more, some are less. Depends on the company.
No, they will not tell you if there is anything wrong with the house. The appraiser is only there to determine what the house is worth. If you want to know if anything is wrong with the house, you need a home inspection (which can also be through any company you want, and typically runs around $300-$500. (but is totally worth it if the house needs thousands of dollars of work)
Good Luck!
What is an appraisal? Back to top
An appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three ”common approaches to value”. They are the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Direct Comparison Approach - which involves making a comparison to other similar, nearby properties which have recently sold. The Direct Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property. For a more detailed description of the appraisal process click here: What is an appraisal?
What does an appraiser do? Back to top
An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports.
Why would a person need a home appraisal? Back to top
There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
To obtain a loan.
To lower your tax burden.
To establish the replacement cost of insurance.
To contest high property taxes.
To settle an estate.
To provide a negotiating tool when purchasing real estate.
To determine a reasonable price when selling real estate.
To protect your rights in an expropriation case.
Because a government agency such as the CCRA requires it.
If you are involved in a lawsuit.
For more details on when you might need an appraisal click here: When to get an Appraisal