What is a Home Appraisal and Why Does It Matter?

Posted by Realty Austin on January 11th, 2024

Getting an accurate home appraisal will be needed during the transaction process if you are getting a mortgage to buy the home. Lenders want to ensure you are not overpaying the market price, so an appraiser will survey the property and use comparable sales to decide on the fair market value. 

In order to find that fair market price, a third-party appraiser will analyze and compare the home to other similar homes in the area. They will also look at the square footage, acreage, number of bedrooms, bathrooms, street traffic, and other assets of the home to determine the price. 

If a buyer pays for the home with cash, it is more common for them to wave the home appraisal altogether. But most home buyers will normally need a mortgage and will have to pay for this report in order to be approved.

Why Home Appraisals Matter
It’s important that an appraisal price does not come in lower than what your agreed-upon sales contract states because a lender will only loan a percentage of the mortgage based on the appraisal amount. It’s common for experienced agents to suggest you include an appraisal contingency in your contract. This means you can consider negotiations, back out of the contract, or put in more cash for the downpayment if an appraisal comes in lower than all parties expected.  

Buyers that receive a low appraisal can always get a second opinion to see if anything about the home was overlooked or inaccurate. But this means that the closing process might take longer than expected. 

 

This is why it’s important for the seller to be up-front and inform the appraiser of anything that might impact the home’s value. 

“I’m a big believer in being proactive with the appraiser versus reactive after the appraisal comes in,” says Realty Austin agent Lauri Schroeder.

“Make sure the appraiser receives your appraisal packet or speaks with you ahead of time,” advises Schroeder. “Include updates, upgrades, repairs, and any comps you want to make sure gets considered.”

It’s important to work with an agent on accurately listing the home to avoid any contract contingency issues that might come up down the road.  Get a comprehensive analysis of your home’s value in today’s market using Realty Austin’s Market Snapshot tool.