How Home Appraisals Make or Break Your Real Estate Transaction

Home appraisals are a vital cog in the wheel of real estate transactions. When a buyer hopes to borrow money from a mortgage lender to buy a home in North Carolina, the appraisal will determine whether or not the lender is willing to loan those funds. Below, let’s take a look at home appraisals and how they affect the sale of real estate in North Carolina.

What Is a Home Appraisal?

In simple terms, an appraisal is an unbiased professional opinion of a home’s value. As it pertains to a real estate transaction, an appraisal determines whether the home’s contract price reflects the value of the home given the property’s condition, location, features and recent sales of similar local properties. A buyer’s mortgage lender requires an acceptable appraisal before the loan can close.

The Lender and Home Appraisal

Because the home serves as collateral for the mortgage, the appraisal provides protection for the lender. In other words, lenders count on an appraiser to determine a property’s value so they don’t loan too much money to the buyer for the purchase of the home. If the appraisal comes in too low for the lender to accept the buyer’s application for a mortgage, the seller will have to lower the price or the buyer will have to come up with more cash to make the deal work.

Who Performs an Appraisal?

Home appraisers are licensed by the state where they provide their services. State licensed and certified appraisers are regulated by their appraiser state regulatory agency which is responsible for enforcing the Uniform Standards of Professional Appraisal Practice. Professional appraisers are also required to adhere to both state and federal regulations. Appraisers are not employees of lenders. To protect the integrity of home appraisals, they provide services to all mortgage lenders. Visit the North Carolina Appraisal Board website to learn more about home appraisers in North Carolina.

What’s the Home Appraisal Process?

Once a buyer and seller come to an agreement and sign a contract for the purchase of a house, the lender will order an appraisal. During the time the home appraiser spends on your home appraisal, he/she will walk through your property, taking note of the interior and exterior of the property. The appraiser will also report on the neighborhood and nearby comparable sales. In the end, the appraiser then provides an analysis and conclusions about the property’s value based on his or her observations.

Remember, an appraisal is not a home inspection. An inspection’s purpose is to make sure the home’s systems are in safe, working order and that there are no structural issues. While the appraiser does perform a visual inspection of the interior and exterior, this only meant to assess the property’s value.

Appraisals and Home Buyers

The entire real estate transaction is in a holding pattern until the appraisal is completed. All parties involved, including the buyer, seller, real estate agents and lender hope that the appraisal comes in at or above the contract price. If it comes in below the agreed price, then the sale of the home could be derailed.

Buyers could use a low appraisal to negotiate a lower contract price from the seller. The seller, however, may feel the property value determined by the appraisal is too low and in turn is unwilling to discard the sales price that was previously agreed to. In that case, both parties could agree to order a second appraisal in the hopes that it comes back with a more acceptable value and the lender allows the transaction to move forward.

Have any other questions about home appraisals and buying a home in North Carolina? Contact us today, and our team of proven, experienced real estate professionals will be glad to help.