What is An Appraisal?
There are a few things that every home buyer and seller should know about appraisals.
What Are Appraisals and Why Are They Important?
An appraisal is the valuation of a property by an authorized person. They are particularly important for purchasers who will be taking out a loan on their next home, which is the majority of purchasers.
When you ask for that loan, banks reference your home’s appraisal or value as a way of deciding how much to give you. That’s why appraisals are so important.
Consider this example: Let’s say you make a purchase offer on a home for $120,000. You need a loan for exactly that amount.
However, when the appraisal comes back, it says the home is worth only $100,000 – and the bank isn’t willing to give you a penny more.
This means that you’re faced with a $20,000 budget gap. And that’s enough to kill many a real estate deal.
Meanwhile, the seller has lost his or her buyer, and will likely need to think about reducing the list price on their home.
How Does An Appraiser Evaluate a Home?
Appraisal values are influenced by a number of factors. For instance, appraisers will consider recent sales of similar properties as well as current market trends. They’ll also factor in such things as the home’s amenities, number of bedrooms, floor plan functionality and more.
Appraisers are required to do a complete visual inspection of the interior and exterior of the home. During this time, they’re also required to note any conditions that may adversely impact the property’s value. This may include needed repairs.
Generally speaking, appraisers use Fannie Mae’s Uniform Residential Appraisal Report for single-family homes. This report asks the appraiser a number of questions, including what the home’s interior and exterior look like, what neighborhood it’s located in and what nearby comparable sales there are. Other parts of the report include: a street map showing the appraised property, an exterior building sketch, an explanation of how the square footage was calculated, and photos of the home. After providing all of this information, the appraiser offers an analysis and conclusions about the property’s value based on this information.
Appraisers must meet also certain criteria. According to the Appraisal Institute, a qualified appraiser should be licensed or certified and also should be familiar with the local area. What’s more, federal regulations stipulate that the appraiser must be impartial and have no direct or indirect interest in the transaction. Fannie Mae even requires that appraisers certify that they have experience appraising similar properties in the same area.
We’ll Help You At Every Stage of the Home Buying Process
We hope you found the above information insightful as a prospective home buyer or seller.
For EVERY stage of the home buying process, we want you to know that we’ll be there to assist you in order to make the experience as seamless as possible. Contact Jennifer or Ginny today to learn more about the services we provide and the valuable advice and insight we can offer. Contact us at info@yourHBHomes.com
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