October 8th, 2016 4:02 PM by Elizabeth Washburn
Appraisals at work in your mortgage
On most loans, lenders depend on an independent evaluation of the home to ensure the home’s value before they front the majority of the funds needed for the financing of a home.
How does the Appraiser decide the value?
The appraiser decides value of the property by reviewing sales of similar homes in the area, the floor plan, overall maintenance and square footage. The appraisal report is a summary of their conclusion.
What is the Lender looking to know?
The lender wants to know what the property is worth. The impact of the appraisal value is more when the down payment is less. For example, if you are putting 5% down and the appraisal comes short, it will strongly impact the structure of your loan; however, if you are putting 25% down, the loan may not be affected at all.
Can the borrower have a copy of the Appraisal?
Borrowers have the right to receive a copy of the appraisal three days prior to closing. You do have the ability to sign away that right at the very beginning of the loan process so you can close without waiting the three days, but always make sure you get a copy of the appraisal before you close. Just so you know, the lender owns the appraisal even though the borrower pays for it so it is not possible to take the appraisal and use it with another lender.
Should I clean up?
A professional appraiser will usually inspect the property’s interior and exterior. While it is always nice to give a spiffy appearance to the house, the appraiser does not look at dirt, so don’t postpone the appraisal until you get a chance to "clean up a little." Delaying adds time to the one item in the mortgage process that takes the longest.
Who pays for the Appraisal?
The borrower pays the appraisal upfront directly to the management company, and a credit card is the best and easiest way to process the transaction. The typical appraisal costs around $475, or more if the property is complex.
In conclusion, an appraisal is definitely helpful to the lender, but it also can be helpful to the borrower for personal knowledge as well as for home insurance. Use your appraisal to learn about your home. It’s a great summary of most people's largest personal investment.