If you’re preparing to buy a home this year, you probably have a lot of questions about the process. A great place to get all your questions answered is at this free monthly Home Buying Seminar. If you missed our article about the forecast for this year’s market and mortgage rates you can read that here. Let's talk about one of the most important steps in the home buying process, home appraisals, and how they work.
A home appraisal is a very standard part of the home buying process where an unbiased professional (also often referred to as a "3rd party contractor") will evaluate your soon-to-be home and give their opinion of the home's value. The values are based on an in-person inspection and using recent sales of similar properties, current market trends, and aspects of the home to determine its value. It is a key component of a home transaction that you will need whether you’re buying a home using a mortgage, refinancing your existing mortgage, or selling your home.
Why is an appraisal necessary? Because your lender will need to be sure of your home’s value and current condition so that they don’t lend you more money than what you need, and to verify your home meets your loan program’s guidelines. Two instances where you might not need an appraisal is when you pay with all cash (as there isn't a lender involved), and if your downpayment is higher than 20% - you may receive an appraisal waiver. Ask your lender if you qualify. If you need a great Oregon Lender who offers potential appraisal waivers, contact Lori Means with Fairway Mortgage at 503-577-5998.
The Cost of a Home Appraisal
It’s important to clarify that appraisal costs will vary depending on the market, although we recommend you prepare to spend at least $800 for this. Keep in mind that some of the factors that will affect this cost include:
Location (if demand for appraisals is high in the area)
How far the appraiser has to travel
Complexity of the appraisal (farm property, multi-family, etc.)
Urgency of the appraisal order (rush orders have extra fees)
The appraisal is not part of the standard closing costs. It is a cost that you pay separately from your closing costs (as are your home inspection costs). As a homebuyer, you will likely never meet the appraiser or be present at the time of the appraisal. The appraisal is for your lender’s benefit, but it will help you know the value of the property so you don’t end up owing more than it’s worth. Finally, if the appraisal comes in low, the lender will not approve the loan for more than the property is worth. At this point you can try to renegotiate with the homeowner and see if they are willing to reduce the price or you could also pay the difference in cash.
At Timber & Rose Realty Group, we have proven systems for making sure our clients don't have appraisal issues that might put getting their dream home at risk. For more information on strategies to make sure the appraisal comes in at the price you pay for a home in a competitive market, or what to do if your appraisal should come in low, come to our free monthly home buying seminar and we'll answer all your questions about buying or selling a home in the competitive Portland Metro Market. You can sign up here.