When Does a Property Appraisal Take Place?
Understand the precise timing and reasons why a property appraisal becomes a necessary step in various financial and property-related events.
A property appraisal offers an unbiased opinion of a property’s value at a specific point in time. This valuation provides an accurate assessment often required for financial, legal, or transactional contexts.
During Real Estate Transactions
In the context of buying or selling a home, a property appraisal typically takes place after the purchase agreement has been signed. This timing allows the lender to ensure the property’s value adequately supports the loan amount requested by the buyer. The appraisal occurs before the loan is fully approved and the transaction can proceed to closing.
The buyer’s lender usually orders the appraisal to protect their investment, confirming the property serves as sufficient collateral for the mortgage. This order is placed once the loan application is processed and the purchase contract is in place. Appraisers generally complete their inspection and report within one to two weeks of being assigned the task.
Following the on-site inspection, the appraiser compiles a detailed report, which is then submitted to the lender. This report typically reaches the lender within a few days to a week after the inspection. Buyers usually receive a copy of the appraisal report from their lender.
The entire appraisal process, from ordering to report delivery, often falls within the contingency period specified in the purchase contract. The appraisal must be completed and reviewed before the lender gives final approval for the mortgage.
For Mortgage Refinancing
When homeowners seek to refinance an existing mortgage, an appraisal typically occurs early in the refinancing process. It is usually ordered by the lender after the loan application has been submitted and a conditional approval has been issued. This step is necessary to confirm the current market value of the property, which serves as collateral for the new loan.
Lenders require an updated appraisal to assess their risk. The property’s current value directly impacts the loan-to-value (LTV) ratio, which is a key factor in determining the new loan amount and terms. The appraisal helps ensure that the new loan aligns with the property’s current market standing.
Once the appraisal is ordered, the process generally mirrors that of a home purchase, with an appraiser conducting an inspection and preparing a report. This report is then sent to the lender, typically within one to two weeks from the inspection date.
The appraisal for a refinance is lender-driven, similar to a new home purchase, but it happens within the context of adjusting an existing debt. It is a necessary step to validate the collateral for the new loan terms.
In Property Tax Assessments
Local tax assessors regularly conduct mass appraisals of properties to establish fair market values for tax calculation purposes. These assessments typically occur on a recurring schedule. This systematic valuation helps ensure equitable distribution of the property tax burden.
The timing of these routine appraisals is set by local government schedules, with property owners usually receiving assessment notices once the new values are determined. These notices inform owners of their property’s assessed value and the basis for their upcoming property tax obligations.
If a homeowner disputes their property tax assessment, they have the option to obtain an independent appraisal. This independent appraisal takes place after the homeowner receives the official assessment notice from the local tax authority. It must be completed and submitted before the deadline to file a formal appeal.
The independent appraisal provides objective evidence to support a homeowner’s claim that their property’s assessed value is incorrect. This appeal-driven appraisal is initiated by the property owner to challenge the official valuation.
Other Common Situations
Appraisals are also conducted in several other common situations, each with specific timing requirements. For estate valuation, an appraisal occurs after a person’s death to assess the value of real estate assets. This valuation is necessary for probate proceedings, calculating potential inheritance taxes, and ensuring an equitable distribution of assets among heirs.
In divorce settlements, appraisals are typically conducted during the ongoing divorce proceedings. Their purpose is to determine the fair market value of shared real estate assets owned by the divorcing spouses. This valuation is crucial for the equitable division of marital property.
For insurance claims, an appraisal is usually performed after significant property damage has occurred. An appraiser assesses the extent of the damage to the property. This evaluation helps determine the loss value, the cost of repairs, or the replacement cost, which directly impacts the insurance payout to the policyholder.