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Facts about Real Estate Appraisals
Real Estate Appraisals are a necessary step in the home buying
process. There is a lot of confusion out there regarding the
truth about appraisals. Some people are confused about their
purpose and often think of them as home inspections. Some people
think that a low appraisal for their home is the kiss of death.
People should take the time to learn the facts about real estate
appraisals. The more people learn beforehand, the better
prepared they will be to tackle this crucial step.
Your home loan approval is contingent upon the results of the
real estate appraisal. It is as simple as no appraisal no loan.
Since very few people have the ability to pay for a house with
cash, the appraisal is going to be necessary. A loan is never
going to go through without an appraisal. The purpose of the
appraisal is to establish the homes market value. The sales
price will be based on the market value.
The main goal of the appraiser is to protect the lender. Lenders
don't want to be stuck with property that is not worth its price
tag, so the appraisal must be completed before the lender will
approve the loan. The information contained in appraisal is
invaluable to the lender. The lender will study the details of
the appraisal before reaching a final decision. It makes sense.
If they are going to be funding the transaction, they should be
aware of the propertys value.
The lender will often dictate the choice of appraiser. It might
have one in house or through a contract with an independent
appraiser. If you go with your own choice for appraiser, they
may be subject to final approval from the lender.
Residential properties are normally appraised using either the
sales comparison approach or the cost approach. When using the
sales comparison approach, an appraiser compares the property to
similar properties that have sold in the area and bases the
market value on the comparables or comps. The cost approach is
based on the costs to build, which means it is more appropriate
for new properties.
The actual appraisal reports are very detailed. They contain
information about the subject property along with comparisons of
a few similar properties. There is an evaluation of the overall
house market within the area. The appraiser will then list any
issues that he or she feels might diminish the
propertys value.
The next component is a list of any serious problems like bad
roofs or weak foundations. The appraiser then gives an estimate
of the sales time for the house. Finally, the report will
indicate the type of property.
It is important to note that the real estate appraisal is not
the same thing as an inspection. The appraiser might make note
of any problems they see, but they are not responsible for
declaring if your home is in good condition or not. They are
only responsible for assessing the property and determining the
market value for the lender. A home inspection is a different
process altogether.
Real estate appraisals only include the home, the land, and any
improvements to the land. It does not cover any personal
property that might be sold with the house. The buyers should
purchase those items separately.
Everyone fears the possibility of a low appraisal. It happens
all of the time, usually during closing. There are some things
you can do to remedy this common but stressful situation. The
buyer can make a larger down payment. If this is not feasible,
the seller and buyer can negotiate the price some more.
Additionally, the appraisal can always be disputed.
What all goes into an appraisal? Appraisers are looking at the
condition and size of the house, its proximity to good schools,
and the size of the lot. Appraisers do not look at dirty dishes
or overflowing laundry baskets. They do care about chipped
paint, broken windows, and appliances that don't work.
Appraisals are not being conducted by just anyone off the
street. Real estate appraisers are trained professionals
licensed by the state in which they work. They are qualified for
the work they do by completing state certification requirements
like exams and continuing education courses. This line of work
demands strong critical thinking skills and the ability to
interact with different groups of people.
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Written By: Lee Asher