What is a Home Appraisal?

You’ve found your dream home, and now it’s time to make it your own. One of the first things you’ll want to check off your final closing list is the home appraisal. So, what exactly is that?

The home appraisal is essentially a value assessment of the home and property. It is conducted by a certified third party and is used to determine whether the home is priced appropriately. If you’re buying your home using a mortgage, your bank will require the home appraisal. This is different from a home inspection — an appraisal protects the financial interests of the lender, and while a home inspection protects the buyer from potential maintenance or repair issues.   

During a home appraisal, the appraiser conducts a complete visual inspection of the interior and exterior of the home. Their assessment will factor in a variety of things, including the home’s floor plan, functionality, condition, location, school district, fixtures, lot size, and more. Adjustments will generally be made if the home was recently renovated, or exterior upgrades like a deck or pool were put in place. The appraiser will also compare the home to several similar homes in the area — known as comps — that sold within the last six months.

Unlike a home inspection, an appraisal only looks at the surface value of the property. The appraiser will note any obvious damage, such as a badly dilapidated roof, but won’t conduct the same thorough tests you’ll get from a home inspector. The final appraisal report must include a street map showing the property and the comps, photographs of the interior and exterior, an explanation on how the square footage was calculated, market sales data, public land records, and more.

After the appraisal report is complete, the lender uses the information to ensure that the property is worth the amount they are investing. This is a safeguard for the lender, as the home acts as collateral for the mortgage. If a buyer defaults on the mortgage and goes into foreclosure, the lender generally sells the home to recover the money borrowed. 

As a buyer, the most important thing to note is that home appraisals protect the bank, not the homeowner. You’ll still need to schedule a home inspection to be sure that your home is in good condition and won’t require any unexpected repairs. 

Are you ready to close on your dream home? Give us a call! 

Real Estate Terms Explained: Title Insurance

If you’re a first-time buyer, you’re probably faced with a lot of unfamiliar terms as you complete the closing process. But don’t worry! We’re going to use the power of the blog to explain (most of) them to you. 

Today’s lesson: Title Insurance

What the heck is title insurance? 

Technically there are two answers to this question, because there are two types of title insurance: the lender’s insurance and the owner’s insurance. Both policies protect against future financial losses. To put it simply, if your home purchase falls through after closing, these insurance policies can save you and your lender from being financially responsible for a property home that you didn’t actually purchase. Most lenders will require this insurance, and you’ll find it included with the rest of your closing costs. Owner’s insurance is optional, but highly recommended. Both policies are a one-time fee that you pay at closing.   

Why would my purchase fall through after closing?

It’s an unlikely scenario, but it is possible. When you purchase a property, a title researcher will check the ownership history to make sure you have what is known as a “clean title.” This means that there are no pre-existing issues that could prevent the title from becoming legally yours. 

A pre-existing issue could be that a previous owner failed to disclose a creditor’s lien on the house, or the property is caught up in an inheritance dispute, or there are uncollected taxes on the property. In most instances these issues are the result of a minor error and can be cleared up quickly, but there are cases where the title issues take months or even years to resolve. And if you find yourself in one of those situations, you’ll be facing a mountain of legal fees and the potential that you’ll lose the property (and the money you invested) before you even unpack. 

Alright, I hear you. How do I get title insurance? 

Typically your agent or closing attorney will start the process for you. You’ll be charged a one-time fee (the exact cost will vary depending on a variety of factors), and even though you only pay for it once, the coverage will insurance your financial transaction as long as you own the property. Please note: this is NOT homeowners insurance — that’s a completely different type of policy and coverage. If you’re not sure how to find the right title insurance, talk to your closing agent or attorney. We live for this stuff. 

Title insurance may seem like yet another unexpected cost, but trust us, it’s worth it. If you still need convincing, give us a call! We’re here to help you every step of the way.