What is an Appraisal?
An appraisal is a document that shows an opinion of how much something is worth. It could be fine jewelry, art, or in our case, a property. The appraisal gives you useful information about the property. It describes what makes it valuable and may show how it compares to other properties in the neighborhood. An appraisal helps assure you and your lender that the value of the property is not just the seller’s (or owner’s in the case of a home equity loan or refinance) opinion, but is based on an expert’s assessment.
Here’s the thing though, appraisals are still based on an opinion, it’s just the opinion of a third party and not the seller. This means that an appraisal can vary widely from one appraiser to another. There are also things that you can do (legally!) that will improve your chances of getting a good appraisal. I’ll be covering that here on the site at length, as most people are not aware of the process and the things that can be done, but first let’s talk about why you might need an appraisal in the first place.
Reasons You Need an Appraisal
Typically, you will need to have an appraisal when you are doing any of the following:
- Buying a new home
- Refinancing a home you already have
- Applying for a home equity line of credit or home equity loan
In my experience, the home buyer will usually have to foot the bill for an appraisal. You are entitled to receive a copy of appraisals, and in my opinion YOU SHOULD ALWAYS GET A COPY FOR YOUR RECORDS. You should receive them soon after they are delivered to the lender in complete form—no later than three days before closing.
You can’t be charged a fee for copies of an appraisal or other valuation. But you can be charged a reasonable fee for the lender’s cost of preparing the appraisal or other valuation.
The average cost of an appraisal is $300-400, but it does vary by state.
In the coming weeks, I’ll be covering the appraisal timeline, and things that you can do to give you the best chance of having a good appraisal!