New Jersey home appraisal

In the state of New Jersey, a real estate appraisal can define the success or failure of purchasing a home, obtaining a mortgage, or refinancing.

According to data from the National Association of Realtors (NAR), 59% of transactions fail due to appraisal value. Therefore, it is key to value a property when purchasing one. 

If you have questions or are looking for more information on this or any other topic, please call us, our NJ real estate attorney is available to assist you.

What You Should Know About a Home Appraisal In New Jersey In 2024

Are you about to buy your dream home in New Jersey? Before doing so, it is essential to understand the real estate appraisal process in this state. Below, we will explain this process in depth.

What Is A Home Appraisal In New Jersey?

A real estate appraisal is an unbiased and professional opinion of the value of the property. Some key aspects to understand this process involve the following elements:

• Lenders will require a home appraisal before providing a mortgage.
• Once it is done, the bank determines the loan amount to ensure that the mortgage does not exceed the value of the home. 
• An appraisal must be less than or equal to the purchase price of the home. 
• Generally, banks do not grant more money than the house is worth. Additionally, they will only approve a loan for a home that is valued at the full sales price or more.

In this way, the house will serve as guarantee in case the owner cannot pay the mortgage. If this is the case, the bank can foreclose. 

How Does A Home Appraisal Work In New Jersey?

Typically, a home appraiser visits the property once it is under contract. Lenders hire these professionals to determine if the mortgage loan is worth the value of the property. 

Appraisers evaluate various property factors to determine the real estate appraisal.

It should be noted that buyers and sellers can hire an appraiser to obtain the fair value of the home. Likewise, the parties and their agents may be present during the appraisal.

What Is The Purpose Of a home Appraisal In New Jersey?

Appraisals are intended to protect both the buyer and the mortgage lender financing the real estate transaction. Through the appraisal, the lender can obtain an objective estimate of the value of the property.

During the appraisal process, the appraiser analyzes everything in the property.

With a home estimate, you can guarantee that you will not borrow more than the actual value of the home. 

If you want to apply for a loan, learn what you shouldn’t do when applying for a mortgage. 

Main Benefits Of An Appraisal Before Buying A House

A home appraisal primarily benefits the lender, although it is also advantageous for the buyer. This is because it gives the buyer the opportunity to negotiate a lower price for the home based on the appraisal. 

If this value is less than the sale price, the buyer can offer an amount that does not exceed the figure determined by the appraiser.

Additionally, many lenders require the buyer to pay mortgage insurance until approximately 80% of the value of the property is paid. After this percentage has been reached, the buyer can request that the insurance be canceled.

How Much Does A Home Appraisal Cost In New Jersey?

The cost of a real estate appraisal in New Jersey ranges from $250 to $1,000, although the national average is $350. However, this amount varies significantly depending on location and home types in New Jersey .

On the other hand, HomeAdvisor averages the real estate appraisal for a single-family home in this state to be $300 to $400. Of course, for multi-family homes the amount amounts to between $600 and $1,500.

Why Is My Real Estate Appraisal Fee So High?

If you appraise a large property or one with a government-backed mortgage, your fee may be high.

Who Pays For A Real Estate Appraisal In New Jersey?

In most cases, the home buyer is the one who pays for the real estate appraisal. This occurs because it is considered part of the closing costs of a home in New Jersey.

If it is a mortgage, borrowers may be able to cover these fees. If sellers requests an appraisal before listing the property for sale, they will be responsible for paying for it. 

Additionally, if you are a borrower who refinances your loan to get a lower interest rate, you will also pay for a home appraisal.

Looking for information on how to sell property in New Jersey? We have a blog about it on our website.

How To Find A Good Home Appraiser In New Jersey?

Some recommendations that you should keep in mind when finding a good real estate appraiser are:

• Verify that the appraiser is licensed or certified in the state.
• Look for reviews online to get an unbiased perspective on the quality of service.
• Check your local Better Business Bureau to evaluate the appraiser’s reliability.
• If you are applying for a government-backed loan, be sure to choose an appraiser who specializes in this topic.

Real Estate Appraisal Cost In New Jersey Depending On Its Type

Traditional forms of evaluation have undergone an evolution, so we can observe some types of appraisal services:

• Traditional appraisal. Provides the most accurate valuation of a home. To do this, the appraiser personally visits the home, performs a visual evaluation and then makes comparisons in the area to generate a report.
• Hybrid appraisal. Two appraisers participate in this process, one performs a visual evaluation and the other analyzes the data. The appraisal ranges from $250 to $375, but only some lenders accept it.
• Desktop appraisal. The appraiser analyzes only publicly available data related to the property. This is usually an affordable alternative, ranging from $75 to $200, but most lenders do not accept it.
• Drive-by appraisal. It involves a visual evaluation of your property from the outside, without entering the house. This appraisal typically ranges between $100 and $150, but is also not typically accepted by mortgage lenders.

New Jersey Home Appraisal Contingencies

A buyer can request that the purchase of a property be conditioned on its appraisal at a specific value.

This measure guarantees financial benefits for the buyer and ensures a sound investment decision. In the event that the appraisal is lower than the agreed price, the purchase contract will govern the steps to be followed between the buyer and seller. 

If the contract states that the purchase price will not exceed the appraised value, the buyers can be released from their obligations. However, if the appraisal is higher than the agreed upon price, the contract typically does not allow the seller to renegotiate the price.

How Are Houses Appraised In NJ?

Appraisals are based on comparable values ​​(or comparable homes) and the size of the property. Appraisers compare both the square footage of the home and other features. For example, the number of rooms. 

These are compared to other similar properties that have sold recently. The evaluation process is a uniform logical method that is based on collecting, analyzing and processing data into an estimate with a well-reasoned value. 

Generally, these are the steps of an appraisal:

1# Define The Problem

This starts the evaluation process and contains the following tasks:

• Identify the property being appraised, whether legal description, address and so on.
• Determine property rights.
• Define the purpose of the appraisal and the type of value necessary for it. For example, agricultural value, market value, use value and others
• Specific date of appraisal required by New Jersey law.

2# Preliminary Planning And Survey

In this phase the following is done:

• How to allocate time and resources to complete the task.
• Estimate the highest and best use of the property.
• Prepare an inventory of the data necessary to collect.

3# Data Collection And Analysis

For this task, it is necessary to collect and analyze three types of data:

• General information: Such as neighborhood reputation, trends in the economy, or influences that affect value.
• Specific data: This is typically on-site, off-site, and Improvement Information (depreciation, square footage and others.).
• Comparative data: This would be the annual income statements and any sales, cost, and revenue data that has been collected. 

4# Highest And Best Use Analysis

The highest and best use is defined as the use that generates the greatest net return on the property over a reasonable time. This is one of the most important steps in the entire process. Additionally, there are certain questions to be answered about the property in question.

Critical data that is needed here includes vacant land sales, market trends, zoning, supply and demand factors.

5# Apply The Data Using The Three Value Approaches

The three approaches to value are the cost, sales comparison, and income approach. However, not all approaches are relevant to properties. 

For example, the cost approach cannot be used to value free land since it only values ​​improvements.

On the other hand, the sales comparison approach cannot be used for properties that are not sold (single-use properties, such as hospitals or churches). 

Meanwhile, the income approach is not applicable for single-family homes that are not rented. 

6# Reconciliation Of The Values ​​Indicated To Arrive At The Estimate Of The Final Value

This step examines the value indicators to arrive at the three approaches. Reconciliation is to resolve differences, so an estimate of the final value is achieved.

For example, all three estimates are reasonably close to the value estimate, but it could be that one or two of them vary widely and only one can be trusted. 

You can get more information about this in the real estate appraisal manual (PDF) provided by the official website of the state of NJ.

How Long Does It Take To Appraise A House In NJ?

Once the mortgage lender orders a professional third-party appraisal, it typically takes up to 48 hours for the appraiser to schedule a visit to perform the evaluation. 

The internal and external inspection of the property can range from 20 minutes to 3 hours or more. 

The process to review comparable sales typically takes 15 to 20 minutes. Finally, the appraiser compiles their findings into a report that can take 2 to 10 days.

What Factors Affect The Costs Of A Real Estate Appraisal In New Jersey?

There are several factors that influence the costs of an appraisal, these are:

• Type of loan. Some types of mortgage loans in the United States require a more extensive process to ensure certain requirements are met. 
• Property size. The cost will vary significantly if it is large or spreads over several acres of land.
• Location. Home appraisers in some states offer appraisals at lower rates than in others. 
• Property condition. Appraisers document any visible defects in the appraisal report, which may require additional time and effort. As a result, costs increase.
• Time of the year. Seasonal conditions may make some areas inaccessible, which could increase the cost of the appraisal.
• Kind of property. Multifamily home appraisals are typically more expensive compared to single-family or condominiums in New Jersey.
• Special features. Properties with swimming pools, terraces, koi ponds and others will require additional evaluation. Therefore, the cost increases.

Is It Possible To Avoid A Home Appraisal In New Jersey?

No, you cannot avoid a home appraisal in New Jersey if you are taking out a mortgage on your home. However, if you are purchasing a home with cash, you may be able to skip the appraisal.

Possible Results After A Real Estate Appraisal

There are 3 possible scenarios when performing a home appraisal. Among them, the appraiser:

• It provides a market value figure that matches the amount agreed upon between the buyer and seller.
• It determines a higher figure, which benefits the mortgage lender.
• Determines a lower figure, which indicates a problem that needs to be addressed.

If the appraisal doesn’t match the agreed upon amount, the mortgage lender may reduce the amount you can borrow. 

In this case, the buyer can request a second appraisal or negotiate the price of the home with the seller. If the seller does not agree, the buyer can choose to pay the difference in cash.

What Should You Do To Prepare For A Home Appraisal?

To obtain a favorable appraisal of your home, we recommend:

• Review previous appraisals: Research any issues that have affected your property’s value in the past and address them.
• Prepare the home for the visit: Organize the space and prevent pets from accessing it to facilitate the inspection.
• Perform a thorough cleaning: Improve the appeal of your home with a thorough cleaning.
• Gather important documents: Make sure you have relevant documents available to the appraiser. For example, land measurements, most recent sales price, or receipts for recent improvements.
• Make small repairs: Fix minor details, such as worn paint or damaged knobs.
• Pay attention to the facade: Improve the first impression with exterior maintenance, such as cleaning the garden or trimming bushes.
• Check comparable prices: Research comparable sales in your neighborhood to get an idea of ​​market value.
• Collaborate with the appraiser: Share the information gathered and be friendly during the inspection.

Why Is A Real Estate Appraisal Needed In New Jersey?

A real estate appraisal is necessary to:

• Establish the value of the property: The appraiser provides an unbiased evaluation of the fair market value of the home.
• Secure a mortgage: Lenders require an appraisal to verify that the value of the property is sufficient collateral.
• Calculate property taxes: Local authorities use appraisals to determine property taxes. As a result, it can help you avoid overpaying taxes.
• Confirm insurance coverage: Many property insurers require homeowners to insure their property for at least 80% of its replacement cost. 
• Facilitate a Home Equity Line of Credit (HELOC) or Refinance: To obtain a HELOC loan or refinance a mortgage, an appraisal is required.

Should The Appraisal Be Equal To The Purchase Price Or The Loan Amount?

The appraisal does not have to be exactly the same as the loan amount. However, it is a key factor that lenders consider when evaluating loan-to-value and the associated risk.

Are Home Appraisals And Inspections Mandatory In New Jersey?

There is no law or legal requirement requiring buyers to complete a home inspection when buying a house in New Jersey. Therefore, the inspection is optional.

Still, an inspection by a professional is a worthwhile investment, especially since they cost a few hundred dollars to perform. 

Appraisals, on the other hand, are actually necessary for buyers applying for a mortgage, as lenders require them. 

What Is The Difference Between Property Appraisal And an Inspection?

The main difference is that the home inspection in NJ focuses on evaluating the overall condition of the property in a non-invasive manner. 

On the other hand, a home appraisal determines its fair value in the current market, supported by sales data prepared by the appraiser.

In conclusion, the home inspection evaluates the condition of the property, while the appraisal determines its value.

How Can We Help You Understand More About Real Estate Appraisals in New Jersey?

Real estate inspections and appraisals can provide valuable information about the property. However, this process can be complex for first-time homebuyers in NJ or buyers in general.

Buying a home is a huge investment, so you need to know as much as you can about the property before you buy it. This is the main reason they are inspected. 

An appraisal is a critical part of any real estate sale. Therefore, it is necessary to know the process and understand the options that can save a big headache later.

The experienced team at Curbelo Law can help you appeal unfair property tax and commercial real estate and lease assessments.