Changing the compressor in a refrigerator takes about an hour.
But when your refrigerator dies, that doesn’t mean the compressor can quickly be swapped out before all of the stuff in your freezer defrosts and has to be thrown out.
- You have to find a repair service and schedule the work. Maybe you have to talk to several of them, in order to get a few price quotes.
- Then you have to wait days (or sometimes, weeks), for the repairman to show up and confirm that the compressor has failed.
- Then you have to wait for a new compressor to be ordered and delivered.
- Then you have to wait for the repairman to come back and actually do the work – and of course, you have to wait anxiously to be sure that the work actually resolved your problem.
So changing the compressor takes no more than an hour. Waiting for the compressor to be changed can take weeks.
Welcome to the world of home appraisals.
Buying a Home: Hurry Up And Wait
Buying a new house is exciting, and most people want to move in as soon as possible. All of the preliminaries that have to be done first, though, can seem to take forever.
The negotiation. The initial paperwork. The home inspection and haggling over necessary repairs. The financing approval. The title search. The home insurance. And all of the other annoying details that crop up before the closing. They can make you crazy, and can take a month or more to resolve.
Add the home appraisal to that list. The appraisal itself doesn’t take very long. But having an appraisal done is a different story.
What Is a Home Appraisal?
In a nutshell, an appraisal is an unbiased, professional evaluation of a home’s current market value.
Licensed appraisers consider several key factors before determining a valuation:
- The overall condition of a home. (Not every small detail, which is the purpose of a home inspection). The appraiser will determine structural integrity (including the foundation, roof and construction quality) and the size of the lot, inventory the number of rooms and the total square footage, and look for major flaws or damage.
- Any changes or improvements the owner has made to the house since the last appraisal was performed.
- The condition of the neighborhood where the house is located, its overall desirability, and its proximity to schools, shopping and other amenities – all of which can affect the home’s value.
- Recent comparable sales (“comps”) in the area, which are used as benchmarks for the property’s current value.
A full report is then prepared, along with a detailed market analysis.
Some companies will do what are called “drive-by appraisals,” during which appraisers consider external and neighborhood factors without entering the home. However, this is usually not an acceptable option for home sales; drive-by appraisals are more commonly done in conjunction with home equity loan applications or foreclosure proceedings.
You can also order an online appraisal, sometimes called a desktop appraisal, in which the appraisers only use publicly-available information to approximate the value of a home. Again, this won’t be an available option when you’re purchasing a home; it’s best used by sellers who want to get an idea of their home’s value before they decide on an asking price.
Bottom Line: A home appraisal determines the real (but approximate) market value of a home, based on its condition, location, and other recent comparable sales in the same neighborhood.
Why Is a Home Appraisal Necessary?
Home sellers don’t care about an appraisal – they simply want the payment that the buyer agreed to in the initial sales contract.
It’s a different matter for the bank or mortgage company that’s issuing a home loan to the buyer, though. Before giving final approval for a home loan, lenders will always require an appraisal of the property.
The reason is simple. The lender is putting up a lot of money to help the buyer purchase a home, and it’s their responsibility to make sure the house is worth the amount of money they’re putting at risk.
If it turns out the house is actually worth less than the agreed-upon purchase price, the bank will either require a renegotiation of the sale price, or simply deny the mortgage. Otherwise, the lender could end up holding the bag if the buyer defaults on the mortgage; when they foreclose on the property and sell it, they’ll end up taking a loss.
However, that sheds light on why an appraisal can also be a very good thing for the home buyer.
If it turns out they’ve agreed to pay “too much” for the house – and they have a mortgage contingency clause in the purchase and sale agreement – they can pressure the seller to renegotiate a lower sales price, so the deal won’t fall through. A lower sales price is always good.
Here’s the bad news: if the seller refuses, the buyer may have to put up extra cash in order to cover the difference between the appraised value and the selling price.
Bottom Line: Mortgage lenders require home appraisals before they’ll approve a loan, That lets them be sure that a house is worth the amount of money they’re lending, and that they won’t be underwater if the homeowner defaults on the mortgage.
How Long Does a Home Appraisal Take?
A traditional appraisal usually takes just a few hours on-site. After all, the appraiser is simply looking for major construction or structural issues, checking out the current condition of the home, and taking some measurements. It will require a few more hours of in-office work to do the research on comps, neighborhoods, local amenities and the like.
Appraisers are professionals, however, and particularly if they do a lot of work in the area where the home is located, that work can be completed pretty quickly. Most can finish the office work in an hour or so.
But think about the story we started with, the one about repairing a refrigerator. Just because completing the actual appraisal takes much less than a day’s work, that doesn’t mean that the entire process takes just a day.
- Details of the sales agreement are sent to the mortgage lender, which undoubtedly has a queue of other loans to handle first.
- Once the lender starts work on the loan, they have to order an appraisal from one of the appraisal companies they work with. Those companies undoubtedly have work queues of their own.
- Once the appraisal is scheduled, and the scheduled date rolls around, the appraiser does the necessary work, prepares the report (and that may not happen on the same day as the site visit), and gives it to office staff to put into final form.
- The appraisal report is finally sent to the lender, where it goes back into their normal workflow.
- Eventually, the lender signs off on the appraisal.
In other words, a half-day appraisal can take quite a while to schedule, complete, and finalize with the lender. Fortunate buyers may hear within a few days that the appraisal was performed and approved by their mortgage company. Less-fortunate ones may have to wait a week or even longer, depending on workloads (and how competent the lender and appraisal company are).
And that wait can cause even more anxiety for home buyers, since they’re likely to have a deadline of only ten days or so for all of the contract’s contingencies to be met. Lenders are very aware of that time frame – but that doesn’t mean that everything goes smoothly.
Patience is always the most important virtue when going through the home buying process. It is certainly important when dealing with a home appraisal.
Bottom Line: It takes much less than eight hours of work to produce a home appraisal. But the process of ordering it, completion of the work, and production of a final report can take anywhere from a few days to more than a week.
Can You Appeal a Home Appraisal?
You certainly can, but you’re unlikely to get very far. Appraisers rarely change their decisions.
If you want to challenge a home’s appraised value, sit down with your realtor and review the report to see if it contains errors or incorrect information. Is the lot size and square footage correct, and is all of the habitable space (for example a finished basement) counted? Is the number of rooms and bathrooms correct? Is the home listed in the wrong subdivision or neighborhood?
Next, work with your realtor to gather as much information as you can about the comps that were used – and not used – in determining the home’s value. Did they use improper comparison sales that were in very different neighborhoods or had very different features, or did they miss homes that were closer in size and amenities to the one you’re trying to purchase?
Finally, have a cordial, not confrontational, conversation with the appraiser. Ask about any errors you feel were made, and briefly discuss the home’s features and applicable comps. Since they were only inside for a short time, they might have missed upgrades or renovations that should have added value to the home’s value. Don’t expect a miracle, but an honest and friendly discussion may make a difference.
If the appraiser won’t change their report, you can ask your lender to have a second appraisal done. You’ll have to have a good justification for the request, and you’ll have to pay for it out-of-pocket. But it might be worth the expense.
Speaking of paying…
Bottom Line: If you’re unhappy with the result of a home appraisal you can gather your own information and appeal the decision. In most cases, though, you won’t get anywhere, and may have to ask for a second appraisal in order to have a chance at changing the home’s final valuation.
Who Pays for a Home Appraisal, and How Much Does It Cost?
A standard home appraisal costs, on average, between $200 and $500. It will usually be on the lower end of that range in rural areas, higher in cities or the suburbs. The cost of an appraisal for a very large property, or one that’s difficult to get to, can be somewhat higher.
The home buyer doesn’t get to choose the appraiser (the lender does that), but they still pay the cost of the appraisal. Many lenders may require payment in advance, but others will add it to the voluminous list of closing costs.
Why would lenders want the money before closing? That’s an easy one. If a bad appraisal ends up killing the deal – and about 10% of appraisals throw a monkey wrench into the home purchase process – the bank doesn’t want to have to chase the would-be buyer after a deal goes south.
Bottom Line: The average home appraisal costs between $200 and $500. The cost is paid by the home buyer, and often must be paid before the appraisal is performed.
Is There Any Alternative to a Home Appraisal?
Not really, if you plan on taking out a mortgage to buy a house. The only real alternative is to pay cash for your new home – which these days isn’t often realistic, but it’s certainly fun to dream.
How Long Does a Home Appraisal Take FAQ
Q: If I want to get into a house quickly and the seller wants to close quickly, can the appraisal process be sped up?
A: It’s possible, depending on the relationship you’ve developed with your lender and the relationships they have with appraisal companies. It never hurts to ask.
Q: What do I do if an appraisal comes back showing I’m paying too much for a house?
A: Assuming that the appraisal was ordered by a mortgage lender, you’ll have to face the fact that you might lose the house. A lender won’t approve a mortgage if you’re paying more than the house is worth. You can turn the problem into a bargaining chip, though, if you have a mortgage contingency clause in the sales contract and the seller doesn’t have another potential buyer on the hook. By telling the seller you need them to reduce the sales price or else you’ll have to walk away, they may agree to a price reduction. On the other hand, you might lose the house unless you pay the difference in value out of your pocket.
Q: Are all home appraisal companies the same?
A: Of course not. But appraisers all have to be licensed, so they’ll all usually come up with similar valuations. The companies also want to maintain their long-term relationships with the mortgage lender, so they have every reason to be honest and fair. If you really think an appraiser is off-base with their numbers and report, you can ask your lender for a second appraisal if you’re willing to pay for it.
Q: Can I have an appraiser do a private appraisal for me before I make an offer on a home?
A: Yes, if you’re willing to pay for it – although the homeowner may not agree to let the appraiser inside, which could make the final valuation less reliable.