California Home Appraisal FAQs: A Resource for Home Buyers

We have written about California home appraisals before, and how they tie into the broader home buying and mortgage approval process. To clarify this subject even further, we’ve created a list of some of the most commonly asked questions relating to home appraisals in California.

What is a home appraisal?

A home appraisal is a professional assessment of how much a house is worth in the current real estate market. It’s like getting a report card for your home’s value.

A trained appraiser visits the house and looks at things like its size, condition, location, and the prices of similar homes (called “comps”) that recently sold nearby. They use this information to calculate an estimated value for your home.

Why are appraisals required when using a mortgage?

When you apply for a mortgage, the lender wants to make sure that the home you’re buying is worth at least as much as the loan they’re giving you. This is crucial because if you can’t make your mortgage payments and the lender needs to sell the house to recover their money, they want to ensure they can sell it for the loan amount or more.

Who orders it, the buyer or the lender?

In a typical home-buying scenario in California, it’s usually the lender who orders the home appraisal. As mentioned above, they do this make sure the property is worth the amount of money they’re lending you.

However, the buyer is typically responsible for paying the appraisal fee, which is a part of the closing costs. So even though the lender arranges the appraisal, the buyer covers the cost.

California home buyers who make all-cash purchases are not required to have a home appraisal, but they might still choose to have one. The benefit here is the same. The buyer gets a professional opinion about the current market value of the home, which could help them avoid overpaying.

How much does a home appraisal cost in California?

The average cost of a home appraisal in California typically falls somewhere between $300 and $600. The actual cost may vary depending on the size and location of the home, the complexity of the appraisal, and the appraiser’s experience. For example, an appraisal for a large home in a rural area may cost more than an appraisal for a small home in an urban area.

How long does the process usually take?

The home appraisal process in California can take anywhere from five days to two weeks—or even longer in complicated scenarios. The timeframe can vary due to a number of factors, including the age and size of the home, the availability of comparable sales data, the appraiser’s current workload, etc.

What factors do appraisers use to determine the value?

Appraisers consider the house’s size and how many bedrooms and bathrooms it has. They also check its condition, to see if it’s in good shape or needs repairs. The location matters a lot, too. They’ll consider things like the neighborhood’s safety, nearby schools, and how close it is to shopping and work.

The appraiser will also consider how much similar homes in the area sold for recently. These are called “comps,” and they help appraisers compare your home to others like it.

If there have been big changes in the real estate market, like prices going up a lot, that can also affect your home’s appraised value. So, in simple terms, appraisers use a mix of your home’s features, the condition it’s in, where it’s located, and what similar homes sold for to decide how much your home is worth.

Can I choose my own appraiser, or does the lender do it?

Typically, when you’re getting a mortgage to buy a house in California, the lender will choose the appraiser. They do this to make sure the appraisal is unbiased and accurate. The appraiser should have no connection to either the buyer or the seller, so that there’s no favoritism.

What happens if it comes in below the purchase price?

If the home appraisal comes in lower than the price you agreed to pay for the house, it can create a situation called an “appraisal gap.” This can be a bit tricky to handle.

As a home buyer, you have a few options in this scenario. You can try to negotiate with the seller to lower the price to match the appraisal value.

If the seller agrees, great! But if not, you might need to come up with the extra money to cover the gap between the appraisal value and the purchase price. This can be a challenge, so it’s essential to have a plan in case the appraisal comes in lower than expected.

Do appraisers consider the neighborhood and market?

Yes, appraisers definitely consider the neighborhood and the local housing market when figuring out how much a home is worth. They don’t just look at the house itself. They pay close attention to the area where the house is located.

If the property is located in a nice neighborhood with good schools and easy access to stores and work, that can boost the home’s value. On the flip side, if it’s in an area with issues like high crime rates or declining property values, that could lower the home’s value.

The local housing market is also crucial. California home appraisers often check to see if home prices in the area have been going up or down recently. If lots of houses are selling for higher prices, it might mean your home is worth more too. But if prices are falling, that could impact your home’s value in a less favorable way.

So, in a nutshell, appraisers don’t just look at the house itself. They also look at the neighborhood and what’s happening in the local housing market to determine how much a particular home is worth.

How does the appraisal affect my mortgage approval?

The home appraisal can have a significant impact on your mortgage loan approval. When you’re applying for a mortgage to buy a house, the lender uses the appraisal to make sure the home’s value matches (or exceeds) the loan amount. If the appraisal comes in lower than the price you’re paying for the house, it could cause some issues.

If the appraisal value is lower, the lender might not approve your mortgage for the full amount you need to buy the house. This means you might have to come up with extra money to cover the gap between the appraisal value and the purchase price.

How is this process different from a home inspection?

There are some important differences between a home appraisal and a home inspection. Both happen when you’re buying a house, but they serve different purposes.

A home appraisal is all about determining the home’s value. An appraiser looks at the house and compares it to similar homes in the area to figure out how much it’s worth. This helps the lender decide if they should give you a loan for that amount.

On the other hand, a home inspection focuses on the house’s condition. A home inspector checks everything in the house to find any problems or issues. They look at things like the plumbing, electrical system, roof, and more. The goal is to make sure the home is in good shape and doesn’t have hidden problems.

So, while both are important when buying a house, an appraisal is about value, and an inspection is about the condition of the home.