How To Appraise A House – The task of appraisal is to determine the current value of a house or other property. Jonathan Storey/Getty Images
Of all the people you’ll deal with when buying or selling a home, the appraiser is the one you’ll probably know the least. However, it can play one of the most important roles in selling or buying. What an appraiser determines can be the difference between you getting the home you want or being able to sell one you don’t have.
How To Appraise A House
A property appraisal is different from a property inspection. Inspectors look for problems that buyers should be aware of before they buy (such as mold or a leaky roof). This appraiser determines the dollar value based on what similar properties to look for in the area as well as the condition of the actual property. If you are borrowing money from a bank or other institution for the purchase, you will probably need to get an appraisal (an inspection is optional, but a buyer would be wise to get one).
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Here are 10 important things to know about appraisals, starting with why mortgage lenders require an appraisal in the first place.
The main purpose of the appraisal is to assure the mortgagee that it is worth the asking price. Banks and other mortgage lenders take a huge risk when they lend hundreds of thousands of dollars to buyers. If the buyer defaults on the loan, the lender’s only recourse is to foreclose and try to sell it. If the money is not as much as the loan, the bank will never receive the money.
That’s why buyers typically pay for an appraisal, which costs between $300 and $400 per family. Banks or mortgage lenders usually have a stable of appraisers they trust to provide accurate appraisals.
If the estimate is equal to or higher than the asking price, then the sale can go ahead, but if it is low, it could be a problem. A bank is unlikely to approve a mortgage that is higher than the appraised value, which is bad news for the seller, who may have to lower the asking price.
Things Appraisers Look For During A Home Appraisal
Appraisers must physically examine the property to determine the size and number of bedrooms and bathrooms, as well as any potential upgrades or defects. ftwitty/Getty Images
Appraisers tend to work busy schedules, especially in a hot housing market. Noble Fields, a certified appraiser trainer in San Francisco, California, says appraisers will actually only waste about 20 minutes. The rest of their work takes place in the office.
The appraisal report is based on Fannie Mae’s Form 1004, which requires the appraiser to physically inspect the property to confirm the property’s size, number of bedrooms and bathrooms, total living space, any home improvements or defects, and more. An experienced appraiser knows exactly what they are looking for and quickly reviews each element of the form.
Because appraisers are short on time, it is important that the real estate agent selling us attends the appraisal and points out important updates or upgrades that may increase the appraisal value, or take into account damage or necessary repairs that may lower the appraisal. value.
This Is How A Property Appraisal Is Carried Out
Legally, brokers and lenders can give their opinion on value, but they are not allowed to dictate to the appraiser what they want to value.
Have you ever heard anyone complain that neighbors with messy lawns or rutted driveways are “raising the value”? They may make sense. Since your value is largely determined by the selling price of similar items in your neighborhood, how your neighbors take care of their property is very important.
But even more of a problem than a weedy lawn or a paint job is the housing market, which has been hit hard by foreclosures and short sales (selling your home for less than you owe on your mortgage if you’re in financial trouble). This type of “distress sale” can significantly reduce the value of similar properties in the neighborhood, including yours.
The good news is that most appraisers will try to exclude foreclosures and short sales if they can find other accurate charges nearby. But if the environment is drowning in disrupted sales, it will inevitably reduce all s.
Home Appraisal And Its Importance In Property Transaction
While ideally a house’s cleanliness doesn’t affect its value, it can affect your appraiser’s opinion of it so that it looks good. Andersen Ross/Getty Images
The appraiser will be at your house in about 20 minutes and you’ll be running around like a crazy person. So is it really important to pull the dirty laundry out of the overflowing hamper and sweep up all the dog hair and dust bunnies? Yes Yes Yes! Yes, you are judged by square footage, number of rooms, and land area, so technically your housekeeping skills don’t matter. But appraisers are human and are influenced by a lot of clutter.
The appraiser’s trainer, Noble Fields, said the appraiser can move freely around the house without having to navigate piles of clothes and other obstacles. Anything you can do to be valued at the top of the range rather than the bottom is worth the extra effort.
Interestingly, the whole point of the appraisal is not to calculate an objective value based on size and amenities alone, but to compare it to others in the area that have recently sold. In order to determine fair market value, an appraiser needs up-to-date knowledge of the local real estate market.
What Home Appraisers Look For And Why It Matters
The appraisal report includes space for three “comparable sales,” known in real estate parlance as “compensations.” An appraiser will use real estate databases such as the MLS (Multiple Listing Services) and other public records to find recently sold properties that match properties based on geographic location, size, age, condition, view, etc. enter These will usually be homes in the same neighborhood as the one being sold.
To be accurate and useful, the compass must be up-to-date. Again, if a real estate agent wants to make sure the seller is getting the best appraiser, they will provide the appraiser with a list of recent offers that are at or above the asking price.
You know that hole in the wall where things went through things and broke things? Cracked windows that you temporarily fixed with duct tape? Dog-scratched back door and cracks in the basement door from repeated slamming by your rambunctious teenager? Everything you wanted and you’ve been put off again? Well, now it’s time to get down and clean it up.
Not only will the damage negatively affect your appraisal, but if your loan is insured by the Federal Housing Administration (FHA), the appraiser must report the damage.
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There are several situations where a seller may want to order their own appraisal. For example, it is not always clear what price a should be quoted. You may meet with several real estate agents, each with a different recommendation for the starting asking price. If you set it too low, you’ll get fewer sales than you could have had, but if you set it too high, you’ll drive away potential buyers.
In this situation, it is wise to pay $300-$400 for an independent appraisal to find the most accurate market value and price accordingly. Just know that lenders still want their appraisal, so your appraisal isn’t the final word.
The buyer has the right to see the appraisal, but not the seller, unless the buyer wants to use it to negotiate a lower sale price. Hill Street Studios/Getty Images
Since the buyer paid for the appraisal, they are entitled to a free copy of the full report. The lender must send an estimate to the buyer as soon as possible, but no later than three days before the end of the loan term. If the appraisal comes in at a lower price than the buyer and seller agreed upon, the buyer will have good ammunition to negotiate a lower price.
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The only time the seller will see a copy of the appraisal report is if the buyer wants to use it to negotiate a lower sale price. If the appraisal comes back at or above the asking price, the seller has no reason to worry. In a hot real estate market, a buyer can have
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