The Home Appraisal Process

Understand the criteria for a home appraisal and how it impacts your real estate financing and purchase.

So you’ve found the home of your dreams in one of the best neighborhoods in Wesley Chapel or Tampa. Among the documents you will encounter as we put together an offer package for your new home is an appraisal contingency. This allows you to ask for an appraisal of the home’s value during the contract period and offers you options based on the results of that appraisal.

If you are financing your home, the appraisal may be required by your lender as part of the mortgage underwriting process. Find out what an appraisal is, what it is not, and why it is an important part of your home purchase process.

What is the purpose of a home appraisal?

A home appraisal reassures you that the home you are purchasing is worth the price you are paying. If you are financing your new home, the appraisal may be required by the lender in order to ensure that the amount of money they are lending you is in line with the fair market value of the property.

How are home appraisers certified?

In order to become a home appraiser in Florida, applicants are required to

• complete 200 hours of training and additional education as required
• document 1500 hours of experience over a 12-month period, including 150 appraisals completed, under the supervision of a certified appraiser
• pass the residential national exam and Florida supplemental exam.

What is a home appraisal based on?

The home appraisal is based on a number of factors including the following:

• Comparable property values based on recent home sale prices
• Property size, features, and finishes
• Specific requirements of the loan itself

Government-backed home loans like the FHA and VA loans require specialty appraisals. These are designed to determine not only the property’s value but also its condition and livability. Referred to as Minimum Property Standards (MPS) they include requirements for safety, security, and soundness in areas like roofing, electrical systems, water heaters, and property access.

These requirements are necessary because many government-backed loans have lower down payments. That means that new homeowners have less equity in the home on Day One. The lender wants to ensure that the home is in good condition so that buyers don’t find themselves saddled with an unmanageable number of home repairs, creating financial hardship.

Is a home appraisal the same as a home inspection?

No. A home inspection checks the home for needed repairs so that you can better determine the condition of the property prior to purchase. With a home inspection contingency, you can negotiate repairs and closing funds, or simply use the information to guide your own home improvements and upkeep planning.

Is a home appraisal the same as a home assessment?

No, a home assessment is conducted by the local or county government to determine the taxable value of your home. Often, assessments don’t take into account as many factors as an appraisal would but are instead looking for a general overview based on the home’s location and characteristics.

Who orders and pays for the home appraisal?

Your lender will order the home appraisal while you as the buyer will pay for it. You may be required to pay at the time of the appraisal or the fee may be included as part of your closing costs. Home appraisal costs in Florida generally range from $200-600 depending on the size, location, and features of the property. The average cost is between $300-400 dollars.

Do I need to attend the home appraisal?

You usually do not need to attend the home appraisal. In most cases, it is the listing agent who will attend the home appraisal in order to ensure that the appraiser has access to the property and to answer any questions he or she may have.

What happens after the appraisal?

Generally, you’ll receive the results of an appraisal within a week or so after it is ordered by the lender. Depending on the results, you may have some decisions to make about your home purchase and mortgage.

What if the home appraisal comes back lower than the agreed-upon purchase price?

With a low appraisal, much depends on whether you are a cash buyer or are financing your purchase. If you are a cash buyer, your response to a low appraisal is based on your own preferences, so long as you have a negotiated appraisal contingency. If you are financing your purchase, the lender will be unwilling to lend you the full purchase price. In either case, you may have to go back to the negotiation table with the sellers. Please note, that having an appraisal contingency addendum is key to buyers having choices and negotiating leverage.

Your options include the following:

• You can exercise your rights under the appraisal contingency addendum and walk away from the contract based on the low appraisal.
• You can renegotiate the purchase price based on the new information or ask the sellers for a credit at closing to make up the difference. You can ask the sellers to pay all of the difference or you can agree to split the difference by adding additional cash to your down payment.
• You can pay the difference by adding additional cash to your down payment.

What if the home appraisal comes back higher than the agreed-upon purchase price?

In most markets, you are under no obligation to share the appraisal with the sellers. If your appraisal comes back higher than the negotiated price, congratulations! That means that you are beginning your homeownership journey with equity already in place.

Wondering about the best greater Tampa, Florida neighborhoods? Popular cities include: South Tampa, Seminole Heights, Davis Island, Carrollwood, Temple Terrace, Brandon, Riverview, Hyde Park, Lutz, Land O’Lakes, Wesley Chapel, Clearwater, and St. Petersburg, Florida to name a few!  Do you want an up-to-date valuation of your current home? Whatever your real estate goals, we have the information you’re looking for so that you can make better decisions about your real estate dollars. Contact us and let’s talk about how our team can help you, whether you’re searching for Tampa Florida real estate or planning to list your home for sale.

BONUS:  Check out this YouTube Video where I discuss the current trend where buyers are waiving their appraisal contingency and bringing more cash to the table to close!