If you’re thinking of buying a home, one of the most crucial steps you can take is the process of getting an appraisal. After making an offer on a home, your agent will recommend you hire a quality appraiser to look at the property. Some buyers hesitate to get an appraisal because it can cost $500 or more. However, a 2023 survey from the National Association of REALTORS® shows that 42 percent of potential buyers have had an offer fall through after getting an appraisal. When you have a major investment like a home on the line, you need to know that you’re about to make a sound choice.

Here’s what you need to know about getting an appraisal and how this wise transaction can protect your financial interests.

An appraisal is a professional, objective, and accurate assessment of a property’s market value. Appraisers determine this value based on such factors as location, size, condition, and recent comparable sales in the area. Though it’s the buyer who pays for the appraisal, this valuation is critical for both the buyer and seller. As a buyer, it keeps you from overpaying on a property. And for sellers, it helps ensure a fair price on the home. In short, an appraisal helps both parties make more informed decisions and agree on a fair market price for the property.

The North Carolina Appraisal Board (NCAB) trains and licenses appraisers, which ensures they have a high level of competency and are unbiased in their judgment. It’s a requirement that licensed appraisers take NCAB-approved continuing education classes every two years to maintain those licenses. This ensures their practices are current and accurate.

Lenders require an appraisal when you apply for a mortgage. This is done so the lender knows the property is worth the loan amount, ensuring the property is valuable collateral for the loan. Not only is an appraisal insightful for both the seller and buyer, but it also acts as a safeguard for your lender. With a professional appraisal, lenders reduce their risk of lending more than a property is worth.

An inaccurate appraisal may negatively affect your ability to purchase, or even derail your purchase altogether. Your lender will provide you with a copy of the completed appraisal. Review it carefully to ensure there are no errors that could cost you money or result in the purchase falling through altogether.

Your lender will order the appraisal, and once it’s scheduled, the process is straightforward. The appraiser will visit the home to look at the interior and exterior to ensure it’s in good condition, confirm the number of rooms and bathrooms, and to see if there have been any changes made to the home. It generally takes less than an hour, and the buyers don’t need to be involved.

Next, the appraiser will take the information gathered during the home visit. Appraisers do extensive research into the market to determine the property’s value. This research and the final report can take up to three weeks. When the report is complete, the appraiser returns it to your lender to finalize the lending process.

An appraisal is not the same thing as a home inspection. A home inspector’s job is to look at the structural integrity of the home and to ensure the home’s systems are functioning correctly. An inspector looks at the condition of the property, as well as looks for any other issues or problem areas need addressing. Buyers receive the inspection report before finalizing the purchase.

Buyers can potentially use a failed home inspection report to ask sellers to fix issues, lower the selling price, or walk away from the purchase altogether. Appraisers, on the other hand, look at location, features that may add value, and the home’s condition to build their report.

Beyond purchasing a new home, you can request an appraisal for other financial situations that may be wise for you down the road. For example, if you’re considering refinancing your mortgage, an appraisal can help determine your home’s current value and how much equity you have in your property. An updated valuation can help you remove private mortgage insurance (PMI) or even get a better rate, helping you save money over the life of your loan.

An appraisal can also help you understand if you’re paying too much or too little on your property taxes. If you’re paying too much, an appraisal can provide the evidence you need to ask for a lowered tax rate on your home, which will also help you save money. In short, appraisals are a great way to make informed decisions on your home.

There are some circumstances in which an appraisal is not necessary. Because of the way homes have appreciated in recent years, homes priced under $400,000 do not need an appraisal. That’s under the median sales price across many communities across the Triangle.

However, appraisals are still required for homes that are insured or guaranteed, either wholly or partially, but a government agency or government-sponsored agency. That includes the Federal Housing Administration, Department of Housing and Urban Development, Department of Veterans Affairs, Fannie Mae, or Freddie Mac. Talk to your lender for insights.

An appraisal is a great way to protect your financial interests. Whether you’re buying or a current homeowner, it’s a great way to ensure you have an accurate, professional assessment of your property’s value. And it can help you navigate the complex world of real estate with confidence.