When you’ve chosen a home to purchase, your lender will require an appraisal to determine the value of the property you are purchasing. This value will determine how much a lender is willing to lend you to buy that property. Here is some information regarding appraisals and what to expect while going through the process.
What is an Appraisal?
An appraisal is a written description and estimate of the value of the property. It protects both you and the lender from mispriced homes. For instance, if the home you’re purchasing is priced at $300,000, but is determined to be worth only $200,000, then the home is overpriced. In addition, a home appraisal also protects the lender from getting stuck with property that’s worth less than they’ve invested.
Who does an Appraisal?
Licensed appraisers who are familiar with home values in your area perform appraisals. National standards govern the format for the appraisal. These standards also ensure that the appraiser has specific qualifications and credentials. Most states have licensing requirements for appraisers evaluating properties located within their states. So in essence, an appraisal is an expert opinion of a certified, state-licensed professional who determines the value of a piece of property. Uniform Standards of Professional Appraisal Practice, commonly referred to by the acronym USPAP, can be considered the quality control standards applicable for real property.
What will be done During an Appraisal?
Usually the appraiser will inspect both the interior and exterior of the home. After the appraiser inspects the property, they will compare the qualities of your home with other homes that have sold recently in the same neighborhood. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.
The appraisal process typically takes about two weeks to complete. Once it is complete, you and your lender will be certain that the value of the home is accurate. If both parties find the information acceptable, you and the lender can proceed toward closing the purchase of your new home.
About UW Credit Union
This information is provided to you courtesy of UW Credit Union, based in Madison, WI. UW Credit Union is a leading provider of home loans in Dane County and throughout Wisconsin.
For more information about the home loan process, please contact a UW Credit Union Home Loan Specialist at 800.533.6773, ext. 2810, or vist UWCU.org.