If you need a mortgage to buy a home, your lender will require a home appraisal -- where a professional estimates the value of your place to make sure it's at least enough to cover the mortgage. While the lender hires the appraiser, the buyer pays for it, which begs the question: What's the cost of a home appraisal?
While the cost of a home appraisal varies by the size and location of your home among other factors, generally you can expect to pay around $300 or $400, according to recent estimates. Here's what you're getting for your money.
What home appraisers do
Appraisals are educated guesses by licensed or certified professionals on a home's value in the current market. Unlike a home inspector, who looks for defects that could cost the buyer money down the road, an appraiser looks at home components that contribute to its value -- mostly location, square footage, number of bedrooms and bathrooms, and overall condition, says George Alexa of Alexa Residential Appraisal in Fairfax Station, VA, who has appraised more than 16,000 properties in the past 30 years.
To assess a home's value, the appraiser will likely visit your home and compare it to nearby comparable homes, or "comps," that have recently sold. This is similar to how your Realtor estimates a home's value, but make no mistake, home appraisers don't work for home sellers or buyers. They work for lenders and help them decide if the home is a sound investment and worthy of the loan you're asking for.
In short, appraisers protect the bank and buyers from a bad deal, so they're worth every penny.
What the appraised price means for you
Once the home appraisal is finished, you will receive a copy of the report from your bank. If the home's appraised value ends up higher than what you're paying, generally the deal will move forward.
If the appraised value is lower than what you offered, this can cause trouble, since your lender will offer you a mortgage only at the appraised price. Let's say you need a loan for $250,000 but the appraisal comes in at $240,000. The bank will cover only $240,000, which means you're $10,000 short of the money you need to buy the home.
But all is not lost! If your offer included an appraisal contingency, you can renegotiate the price with the seller and, if she doesn't budge, walk away from the deal (and keep your deposit). Or you could decide to pay the additional $10,000 out of pocket so your home loan goes through. In either case, you have options, so discuss them with your Realtor.
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