Thinking of selling or refinancing your home? Or maybe you’re interested in buying a new property somewhere in the state? If you’re going to need a loan then an appraisal will be part of the process. In this article, we’re going to look at the home appraisal basics so that you’ll be “in the know.”
The first thing you need to know is, “What is an appraisal?” It’s simple really. An appraisal tells us how much the property is worth. More importantly, it helps the lender know whether the funds they are lending are in line with the property you’re buying.
Banks and financial institutions determine how much they are willing to lend on properties based on appraisals. They will then use that information to decide whether or not to provide financing for the property in question. An appraiser will look at a number of different factors when determining the value of your home. Now let’s look at home appraisal basics.
What Is an Appraisal Report?
An appraisal is an estimate of the market value of a property as of a specific date. A licensed appraiser will conduct a visual inspection of your home and the surrounding neighborhood, consider comparable sales and rental rates, and review recent comparable property sales in your area to arrive at their estimate of your home’s value.
Once complete, the appraiser will prepare a report that outlines all of their findings and includes an estimated value for your home. The report will include information about the location of your home, its condition, what comparable properties in the area are selling for, and any adjustments that were made to the data that led to the final estimate of your home’s value.
How to Find the Right Licensed Property Appraiser?
Before you get an appraisal report done on your property, you’ll need to find a licensed appraiser. Usually, the lender will make the request for the appraiser to do their job. They won’t know the name of the appraiser because they’re typically chosen at random out of a pool of local appraisers.
If you’re a home seller, you might want to hire an appraiser to help you get a better understanding of your home’s value. If you’re in the Orlando area, look up J Paul Appraisals, where you can get started with a free quote. You can also ask your favorite real estate agent to give you some recommendations.
Why Might You Get One?
As we mentioned above, a home appraisal is necessary when you are buying a new property, selling your home, or refinancing your current home with a mortgage. A lender will often ask you to get an appraisal done as part of the application process. This is to make sure that your home is worth the amount of money that you’re trying to borrow.
In a very hot market, there are times when it makes sense to waive the home appraisal in order to have better odds of obtaining the winning offer. Multiple offer situations will bring out the true value of your real estate agent’s negotiation skills. That, and identifying your own risk levels.
What Lowers a Home Appraisal?
The main factors that affect a home appraisal are the:
- location of the property
- condition of the property
- comparable sales data for other properties in the area.
If a property is located in an area that isn’t very desirable, it is likely to be appraised at a lower value than a comparable property located in a more desirable area. Likewise, if a property is in poor condition, this will affect the appraisal’s number.
It’s very common for homeowners to think their home is worth more than it is. With the arrival of Automatic Valuation Methods (AVMs), people can easily see what certain real estate websites think a property is worth. But these AVM values will never be as accurate as an appraisal created by a professional. There are even some real estate agents who create Comparative Market Analysis (CMA) that do a better job than appraisers.
We hope you’ve enjoyed these home appraisal basics. Come back for more current real estate education and analysis.