Unlocking Your Home's Value: A Guide to Appraisals

What is a Home Appraisal?

When you're buying a home, especially in competitive markets like Boston real estate, you'll hear about something called a home appraisal. Think of it like a formal check-up for the house you want to buy. An independent expert, called an appraiser, looks at the home to decide its true market value. This is super important because your lender (the bank giving you a loan) wants to make sure the house is worth at least the amount they're lending you.

Whether you're eye-balling a charming brownstone in Brookline Village / Larz Anderson Park, or an apartment close to all the action in Harvard Square, the appraisal process is a key step.

Why Do I Need an Appraisal?

The main reason for an appraisal is to protect the lender. If, for some reason, you can't make your mortgage payments, the bank might need to sell the house. They want to be sure they can sell it for enough money to cover their loan. It also protects you, the buyer, from paying too much for a home.

Who Does the Appraisal?

An appraiser is a trained and licensed professional. They work independently, meaning they don't work for you, the seller, or your real estate agent. This helps ensure their opinion of value is fair and unbiased. They're typically chosen by your lender.

What Does an Appraiser Look For?

Appraisers look at many things when deciding a home's value. Here's a quick peek:

• Location: Is it in a desirable neighborhood? Is it close to good schools, transportation, or popular spots like the shops and restaurants in Central Square?
• Size: The square footage of the house and lot.
• Condition: The overall state of the home, including any needed repairs or recent upgrades.
• Features: Number of bedrooms, bathrooms, type of finishes, kitchen updates, etc.
• Comparable Sales (Comps): This is a big one! The appraiser will look at similar homes that have recently sold in your area. They compare your potential new home to these 'comps' to get an idea of what buyers are actually paying for similar properties. For example, if you're looking at homes in Somerville, they'll compare it to other recently sold homes in Somerville that are similar in size and condition.
• Market Trends: What's happening in the local real estate market? Are prices going up or down?

What Happens After the Appraisal?

After the appraiser visits the home and gathers all their information, they write a detailed report. This report will state their opinion of the home's value. Here are the possible outcomes:

• Appraisal Meets or Exceeds Sale Price: Great news! This means the lender is happy, and the home is worth at least what you've agreed to pay. The loan process can move forward.
• Appraisal Comes in Lower Than Sale Price: This can be a tricky situation. It means the appraiser thinks the home is worth less than what you and the seller agreed upon.

What if the Appraisal is Low?

If the appraisal comes in low, don't panic! You have a few options:

• Negotiate with the Seller: You can try to get the seller to lower the price to match the appraisal.
• Pay the Difference: If you really love the house, you can choose to bring extra cash to the closing to cover the difference between the appraisal and the agreed-upon sale price. Your lender will only loan you money up to the appraised value.
• Challenge the Appraisal: If you or your agent believes the appraiser missed something important or used bad comparable sales, you can ask your lender to challenge the appraisal. This doesn't always work, but it's an option.
• Walk Away: Most purchase agreements have an appraisal contingency. This means if the appraisal comes in too low, you can usually back out of the deal and get your earnest money back.

Key Takeaway for Buyers

Understanding the appraisal process is vital for any home buyer, especially in the competitive markets of New England. It's a protection for both you and your lender, ensuring you're making a smart investment. If you have questions about appraisals or the home buying process, always talk to your real estate agent or lender.