When purchasing a new home in Colorado, most individuals are focusing on where the home will be located, the square footage, kitchen size and so many more basic aspects. What most potential home owners forget about is the home appraisal. A home must be appraised before a contract for purchase can be approved. Most potential home owners have no idea as to what the appraisal process entails. Read on to see what to expect from a home appraisal.
What is a Home Appraisal?
An appraisal of the home is an educated guess as to how much the property is worth. Several aspects are considered when it comes to a home appraisal. The previous sale price of the home as well as any upgrades to the home are considered along with property values nearby, including most recent home sales. A home appraiser has the experience and knowledge to be able to review your home and provide a fair value.
Why is an Appraisal Important?
A financial institution will not provide a mortgage loan without having an appraisal of the property. The appraisal allows the bank or financial lender to know what the loan collateral will be worth based on a worst case scenario. The bank does not want to be stuck allowing an individual to borrow a certain amount of money if the home is not worth the amount. This is also important to the home owner. You do not want to invest $100,000 in a home as a buyer when the home is only worth $80,000 or even less. You want to pay a fair price for the home based on market value.
How is a Home Appraisal Different from a Home Inspection?
Many home owners confuse a home inspection with a home appraisal. A home inspection will be searching for defects of the home that can cause financial strain after the purchase of the home. You want to know if anything is wrong with the property before buying. With an appraisal, the appraiser is looking at the home to determine a value, not looking for anything wrong in particular with the property. However, if an appraiser notices an issue, they may request an inspection.
How long is the Appraisal Process?
The process of appraisal can take about a week maybe two. The actual appraisal of the home does not take long, just a short time and can be done in one day. However, information on the home must be gathered with underwriters having the option to request more information about the home’s past. Taking photos and gathering such information can take time.
If you are purchasing a home in Colorado, an appraisal is a must. You want to know the true value of the home to ensure you are getting a great deal. Know that the appraisal must be done before the loan process can continue. You do have the option to back out of a home purchase if the appraisal comes back as a lower value. Consult with your realtor to find out more about the appraisal process when conducting a home search.