Getting a home appraisal is an important part of the home-buying process. Just about any lender is going to require that an appraisal be done, to make sure that the value of the home actually is what the buyer and seller say that it is.
What does a home appraiser do?
A real estate appraiser's job, simply put, is to determine the fair market value of the home being sold. This protects everyone involved. Having an unbiased, expert opinion protects a buyer from spending more than is fair, and it also protects the bank. Homes are the collateral for a home loan, so if someone defaults on that loan, then the bank winds up owning that home. They want to make sure that it that happens, they don't suddenly own a home that's worth a lot less than they paid for it.
How do they do that?
A lot of factors go into determining the value of a home - other home prices in the neighborhood are a big one. So are public land and tax values in the area. The size, condition, and amenities of the house all play a role, as well. The appraiser will look at how useful the floor plan is, how much square footage the home has, and take stock of the house's permanent fixtures. They will also take a look at a sampling of other houses in the area that have recently sold, and/or houses that are currently on the market, to further bolster their case. Ideally, these houses will have a comparable in size and amenities to the home being purchased.
Does this have anything to do with home inspections?
An appraisal is not the same thing as a home inspection. However, when you have an FHA Loan, the appraiser is asked to investigate the home to make sure that it meets certain basic health and safety requirements. This is not the same thing as an inspection - an inspection is much more thorough and goes a lot farther towards protecting a buyer. The appraiser is just looking for basic things - checking that the roof is in good repair, that the lot is graded enough to draw water away from the house, that all the stairs have handrails - those kinds of things.
Please note that you do also want a home inspection, regardless of what anyone else tells you. A home inspection can save you a lot of headaches down the line, and can also help you in the event that something unanticipated goes wrong, especially if it's something that the inspector should have caught, but didn't.
What happens in the end?
When the home appraiser is done, they will hand in a very thorough report. It will include some photographs of the home exterior, as well as photos of the homes that they used for their comparison. It will talk about how they arrived at the number that they assigned as the home's value. This is important because that number is usually the maximum that the bank will loan you. If it comes in too low, you're going to have to find a way to make up the difference, work something out with the seller, or talk to the appraiser about what you think is off. Most housing contracts are conditional on funding, and if the funding doesn't come through, you're off the hook - but you're also without your dream home. Often, the appraisal goes smoothly, but if the numbers are off of what the parties were expecting, this document will be important to have.
