What is a home appraisal?

If you’re purchasing a house or condominium with a mortgage, a home appraisal will be required in order to secure your loan. Here’s everything you need to know about home appraisals to guide you through the process.

What exactly is an appraisal? An appraisal is done by a professional who views, analyzes and estimates the value of your prospective home to determine if it is worth enough to cover the amount of the mortgage. The appraiser will compare the specifications of the house to other similar homes in the area that have recently sold, to determine the average market value. Specifically, he or she will look at the aspects that contribute to its value, such as square footage, number of bedrooms and bathrooms, and the neighborhood location.

What does an appraisal cost, and who pays for it? Depending on the size and location of the home, appraisal fees average between $300 and $500. Typically, the buyer pays for the appraisal, but technically the appraisal helps lenders determine if the home is worthy of the loan. Therefore, appraisals protect both the bank and the buyer, ensuring the home purchase is a fair deal.

If the appraisal value is in line with the asking price and loan amount, the deal will proceed. Sometimes, the appraised value is lower than the offer price, and in that case the lender will only offer a mortgage in the amount of the appraised value. If this occurs, prospective buyers can either pay the difference with cash, or renegotiate a lower price with the seller.