If you are in the market for a new home, want to sell your current home, or have an interest in refinancing the home that you live in, it is imperative that you gain a detailed understanding of how a property appraisal is utilized in order to determine the value of the structure and associated property. Did you know – for example – that not only does the property appraisal outline the value of a home but that it may impact whether or not you are approved for a loan and how much interest will be charged on that loan? Continue reading to learn more.
What is a Property Appraisal?
A property appraisal is a professional-based opinion that is offered in an unbiased manner regarding the value of the structure and associated property. These are regularly utilized in transactions involving homes and those that transactions that pertain to refinancing. The value may be used in the following instances:
- Determining the worth of the home for the purpose and intent of establishing a price for selling the home
- Performed by a lender to protect their interests in loaning money as the home is typically used as a form of collateral
- Lenders typically require an appraisal during the refinancing of the property so that the amount of the new mortgage may be justified
- Appraisals are done for the purpose of providing a home equity loan to a borrower to ensure that the value has increased and that there is true equity to back up providing the loan
- Property appraisals may be done so that a homeowner may take out another type of loan – such as a business loan – so that the lender knows that the collateral is worth the risk
- Many homeowners have a property appraisal done so that they may appeal the costs associated with their property taxes
- A property appraisal is typically done on homes for sale so that the potential buyer knows its true value and is able to negotiate the price of the property
- An appraisal may be done by parties that have an interest in the estate – such as those that are going through a divorce or those that are beneficiaries to a loved one’s estate for the purpose and intent of determining value so that the proper percentages of the proceeds from a sale may be split among all
- If there is damage as a result of defects involving the construction of the property, an appraisal is done to assist in filing insurance claims and pursuing legal action
- Property appraisals are commonly performed when a person files for bankruptcy as the homeowner will need to provide documentation that pertains to their assets
Why is a Property Appraisal Important in Real Estate Transactions?
Property appraisals are a necessary component and factor in the buying and selling of real estate. There are many reasons for this. The main ones being that lenders will not provide loans if the value of a home is less than the amount of loan that is requested. Additionally, an appraisal helps in determining the worth of the home.
What Does an Appraisal Tell About the Property Assessed?
A property appraisal provides a third-party, unbiased opinion of just how much the property is worth based on the fair market value. In short, it tells about the overall condition of the home, highlights repairs that may be necessary, and how the property stands up or compares against other nearby homes that have recently been sold.
Is a Property Appraisal and an Inspection the Same Thing?
A property appraisal and a home inspection both evaluate the condition of the home and offer a conclusive report; however, they are two different things and serve different types of purposes in the process of a real estate transaction. The property appraisal professional will make a judgment about the value of the home, but the inspection involves a comprehensive look at the general condition of the structure. Appraisals simply provide an outline of the valuation of the said structure based on the current guidelines and fair market value. A home inspection will zoom in all components of that home – such as the various systems and conditions of each.
What Does a Property Appraiser Look For?
Generally speaking, those that work as property appraisers will at various factors to determine the fairest market value of the structure. Fannie Mae has a publication called the Uniform Residential Appraisal Report that most professionals utilize to conduct their appraisal. It outlines both the inside and outside condition of the home and is dependent upon a list of homes near the home being evaluated that are similar in size and location that have actually been sold. The goal is to ensure that the value that is established is in direct line with all current trends and prices in the real estate market.
The Home Appraisal Report
All property appraisal reports vary from one area to another; however, those in a general location – such as a specific county – are typically similar to one another. The sections that are included in the report may include any of the following:
- The address of the home and the purpose of the appraisal – be it to sell, buy, refinance, or obtain another type of loan
- The parcel number and is there are any fees pertaining to a governing homeowner’s association where the home is located
- Details involving the purchase contract (if relevant)
- Characteristics of the neighborhood where the property is located, including any and all price or market trends related to that particular area
- The size of the property and the type of home on that property, including any additional buildings and attachments
- The condition and the features of the home that is being appraised
- Information about the homes in the neighborhood where the property is located and how much those properties have sold for recently
- The type of utilities that are present with the property
How Much Does a Property Appraisal Cost?
Property appraisals are typically required by a lender, but a borrower is required to pay for the evaluation. At the minimum, the appraisal will start at $200; however, they are typically higher than this. This is a low-end estimate. Despite the costs, an appraisal is a very valuable tool that could impact your finances in a positive way. Not only does it help in coming up with a price you can sell your home for, it also comes up with a value of a loan that you may take out. In addition to this, it may have a direct impact on whether you have a high interest rate or a low-interest rate on any loan for which you are approved.
Receiving the Appraisal
Once you receive your copy of the appraisal be certain to review it completely. If you feel it is not valued appropriately, you may encourage a lender to reassess a valuation. This is typically done if the report contains errors, leaves out specific information, or contains any biased type of information. If you request this, ensure that you provide complete and factual information that addresses your issues with the valuation.
Contact Us Today
If you are interested in a home equity loan, refinancing, or other types of loans, a property appraisal may help you with the approval process! If you would like to learn more about this, please contact one of our finance specialists today by visiting one of our many locations at Somerville Bank today.