When a seller lists their house, a buyer makes an offer, or a lender approves a mortgage or refinance, they don’t just pull numbers out of a hat. The value of the home as reflected in those decisions is a product of the art and science of appraisal.

A home appraisal is a fundamental and indispensable part of almost every real estate transaction. It is how homeowners don’t sell themselves short, how buyers don’t overpay, and how mortgage lenders evaluate whether and how much money they will provide to facilitate the transaction.

If you are considering a home sale or purchase, here are some key facts to understand about home appraisals.

Who Does The Appraising and How Do They Figure Out a Home’s Worth?

Home appraisers are specially trained experts who offer unbiased opinions about a home’s worth. In Illinois, home appraisers must be licensed by the state’s Department of Financial and Professional Regulation. Under federal regulations, appraisers must be impartial and have no direct or indirect interest in the transaction.

The appraiser will do a thorough walk-through and inspection of the interior and exterior of the home. They will also review relevant documents about the property, such as plats, deeds, surveys, HOA agreements and restrictive covenants, floor plans, and inspection reports.

The appraiser then takes the specific information about the home’s characteristics, features, and condition and puts that in the broader context of the neighborhood and location, current and anticipated market conditions, and recent sales of similar and nearby homes (called “comparables”).

Based on all of the foregoing, the appraiser will make conclusions and offer their opinions of the home’s value, which they will then put in a report which all parties to the transaction will receive.

What Is In An Appraisal Report?

Typically, a home appraisal report will follow the form of Fannie Mae’s Uniform Residential Appraisal Report for single-family homes. The report will contain at minimum the following information.

  • An explanation of the valuation and what the appraiser did to come to their conclusions.
  • A brief overview of trends in the local real estate market
  • Summary of the home’s characteristics
  • Structural problems and defects
  • Neighborhood details
  • List of comparable properties including purchase and sale information
  • Photos of the home and comparables

Who Pays For The Appraisal?

Mortgage lenders who finance a home purchase are putting a lot of their money into the deal, so they want to make sure that the amount they are paying approximates the home’s market value. The lender will be the one to hire the appraiser, but the buyer will usually be responsible for the cost. An appraisal can run somewhere between $250-$400, depending on the home and scope of the appraisal.

How Does An Appraisal Impact a Potential Home Purchase?

If the appraisal comes in low relative to the listing or contract price, the purchaser can use that valuation to renegotiate with the seller for a reduction in the price or ask that they make up the difference between the appraised value and purchase price in cash.

Get Started Today

The first step on your journey to buy or sell a Chicago home is to contact Z Chicago. Our knowledgeable and committed agents are ready to help you get from listing to closing at the best possible sale price.