Buying a new house is never an easy journey. It is not just about picking one property and paying the price for it. It is a big investment, and you want to make sure that you are getting the best deal before closing.
One of the tasks that you will need to complete to ensure you are paying your money’s worth is conducting an appraisal. It is an independent assessment of the property’s value, which a licensed appraiser conducts. The appraiser will evaluate the property’s condition, size, location and other factors to determine its fair market value.
However, while an appraisal is an important step in home-buying, some buyers may find it less important because they do not want to spend much money on it. Still, it can ultimately put them at risk of overpaying for the property or facing legal issues if the appraisal value is lower than the purchase price.
When is appraisal needed?
There are a few reasons why you need an appraisal when buying a new home:
- Financing: Most lenders require an appraisal before approving a mortgage. This is because the appraisal helps the lender determine the property’s value and ensure that the amount you are borrowing is appropriate.
- Accurate value: An appraisal provides an objective assessment of the property’s value, which can help you avoid overpaying for the property or, conversely, ensure that you are not selling it for too little.
- Negotiating: An appraisal can be used as a negotiating tool in home-buying. If the appraisal value is lower than the purchase price, you may be able to negotiate a lower price or ask the seller to make repairs or improvements to increase the property’s value.
- Insurance: If you’re purchasing homeowners insurance, your insurer may require an appraisal to determine the replacement cost of your home. An appraisal can help you determine the value of your home’s structure, as well as the value of your personal property and other assets.
- Tax purposes: In some cases, an appraisal may be necessary for tax purposes, such as when challenging property tax assessments or transferring ownership.
In general, you will need to have an appraisal before the closing date.
When can buyers skip appraisal?
There are certain instances when it may an appraisal may not be needed, such as when:
- You are purchasing a property through cash payment.
- You are buying a property in a low-risk area with a stable market.
- The appraisal is included in the purchase price of a new property and is not an additional cost.
- The transaction is straightforward, such as a sale between family members or a quick sale with no financing.
However, it would still be a good idea to check with a real estate professional or a lawyer to determine if your situation requires an appraisal or if you can skip it without worries. This helps ensure that you are paying a fair price for the property.
The home-buying journey can be a complex and unpredictable path, but an appraisal can provide a much-needed map, helping you avoid costly mistakes and ensure a smooth transaction.