How to avoid appraisal issues on your next home purchase
Discover how to avoid appraisal issues when purchasing your first home. Learn what an appraisal is, understand how it works, ask the right questions, and rely on professionals for help. Be prepared by educating yourself on appraisals and taking a homebuyer education course.
If you're in the market for your first home, you may be wondering how the home-buying process works. Of course, you want to ensure that everything goes smoothly, but there's one particular aspect of buying a house that can get tricky, appraisals.
What is an appraisal?
Appraisals are evaluations of property value done by a third party (also known as an "appraiser") who is not involved with either buyer or seller. The appraisal helps ensure that both parties are on the same page regarding price and financing options before they enter into an agreement. Appraisals are used by lenders to determine how much they will lend on a property--they do this by comparing the value of the home with its purchase price or mortgage amount.
If the home is appraised at a lower or higher value than the sale price, or there aren’t homes in the area to compare it to, your mortgage approval could fall through. The good news is there are ways to avoid appraisal issues or resolve them before they halt your mortgage approval process. Since a home appraisal is essentially your appraiser’s opinion (based on their expertise and experience) if you can prevent new or unique data you might be able to change your appraiser’s mind.
Common appraisal issues to avoid
Sometimes things are out of our control, but luckily, there are a few things that you can do to ensure the appraisal and homebuying process goes smoothly. These are some issues to avoid.
Remaining uneducated about the process
Knowledge is power! If you're reading this blog, then you're on the right track. Ask friends and family about their experiences, research, or take our homebuyer education course to give you a leg up on the process. Once you've gained some knowledge, you can be more prepared to ask the right questions when talking to your realtor about properties like How much does this property cost? What kind of financing can I get for it? Do I qualify for any government programs that would help me afford my monthly payments? Do I have enough saved up for down payment requirements?
These are all good questions that will ensure that this home is right for you both financially and logistically. Your realtor and lender should be able to answer questions like this when you are in the process of looking for a home. Doing research and asking these questions beforehand will make sure you don’t get too attached to a home that isn’t right for you or doesn’t fit your needs.
*Make sure you know what type of mortgage loan fits best with your needs before applying for one; some may require higher down payments than others or come with lower interest rates but higher monthly payments.*
Allowing an appraisal to get in the way of your deal.
Appraisals aren't always set in stone--they can be negotiated with lenders and sellers. If you know that an appraisal isn't going to work out well for either party involved in your transaction (you or the seller), then there may be room for negotiation on price or timing until another lender makes an offer on the property.
Make sure you know exactly what type of loan you need before beginning your search for homes so you can negotiate within your means.
Not relying on an inspector and other professionals for help.
If you don't have access to an experienced contractor or inspector, find one with proper qualifications and a good reputation. Your real estate agent or mortgage broker may be able to recommend someone who's previously done work on houses similar to yours. Consider hiring an attorney if there are any legal issues that come up during the transaction process. An appraisal is an important part of the home-buying process, but remember, there are things you can do to avoid problems with appraisals when purchasing your first home. If you aren't sure about any part of the appraisal process, talk to a professional about what you can do to prevent appraisal issues on your next purchase.
Preparing yourself for homebuying success
It’s easy to get caught up in the excitement of buying a home and miss a few important steps to ensure that you have a seamless experience. The best way to prevent undue stress and hiccups in the process is by educating yourself on all aspects of the home purchasing process. It's always better to be financially and logistically prepared for anything that can happen in your homebuying process. Knowledge is power, and understanding home appraisals will help you avoid issues that might come up with yours. As always, taking a homebuyer education course is a great place to start!