You’ve put in your bid for the home you want. Now you await
the appraiser’s report. What’s going on behind the scenes?
How the Appraisal Works in Most Cases
The typical home appraisal relies mainly on local sales
comparisons, or comps. What will other buyers pay now for a house like
the one you’re buying? Whatever price others will pay for similar homes is
roughly the value of your new home.
What’s a similar home? The appraiser considers homes within
a certain radius of the one you’re buying, with comparable bedroom and bathroom
counts, the same or similar size and construction type. Comparable homes have
the same school district or a similarly ranked school district, and similar
amenities nearby. The appraiser studies and compares sales information and
recorded documents for the homes. Homes sold in the last three months are
considered the most relevant comparisons.
Even similar properties are unique homes, of course. Therefore,
the appraiser will find enough variety in the data to come up with a range of reasonable
valuations. Some comparable properties might have been sold for more than the
market value, others at below-normal prices, and so forth. Once the outliers
are understood for what they are, an appraiser needs to figure out where your
desired house fits among slightly more and slightly less costly properties.
The expert’s professional discretion explains why, many
times, the appraisal will come back with a valuation very close to the price
you offered and the seller has accepted. As long as your agreed-upon purchase
price falls within the data-supported range of value calculated by the
appraiser, a buyer usually gets an appraisal that matches what the buyer and
seller think the home is worth.
Continue reading “Navigating the Home Appraisal: A Buyer’s Guide”