An appraisal is an essential part of the home buying procedure. It is responsible for establishing the property's market value and the likely selling price that should be expected in a competitive and open real estate market.
The lender needs appraisals when the buyers use their home as collateral for their mortgages. An appraisal offers the lender a clear assurance that the property will sell for at least the amount the financial company is lending.
Appraisers become licensed after finishing internship hours and coursework. The appraiser is an important part of the home buying process. The appraiser has no connection or financial connection to any party involved in the transaction. Subjective property is the assets that are being appraised. In many instances, the parties pay for the appraisal during the time of loan application. At times, the appraisal fee is included in the settlement statements and paid during closing.
The home appraisal report is very intensive and detailed. It depends on the appraiser`s on-site inspection of the property and also the calculation of the sales data. Lenders make sure the individual does not borrow more than the value of a home. If the homeowner default in payment, the company will resell the house to recoup the money.
The appraiser should be familiar with the local area in which the borrowing of the loan takes place. Also one should have experience in appraising similar properties in the same geographical area. Appraisal value depends on the current market and the recent sales of similar properties.
Some key factors in determining the appraisal value are bedrooms, floor plan functionality, bathrooms and square footage. The appraiser will be responsible for completing the visual inspection of the whole home. The appraiser will inspect both the interior and exterior of the house and determine what may affect the value of the property.
The homeowners should know that when one is buying a home and they are under contract, the home appraisal should be the first step during the closing process. If the home appraisal comes in above or at the price, the transaction will proceed as planned. In cases where the appraisal comes in below the sale price; it will derail or delay the transaction. There are high chances that neither the seller nor the buyer will want the transaction to slow. If a bad appraisal value occurs, the buyer will likely want to adjust the offer.
As a seller, if the appraisal is low, the lender will not approve the loan. The seller should convince the appraisers that the home worth more because of the better conditions. Sellers are aware of the housing crisis that should make appraisal to come low below the market value. Sometimes it makes the appraisal a hard challenge to manage.
Pros & Cons
The benefits of home appraisals center around knowledge and expertise. Home appraisers are experts at accessing property value which is something most buyers are not. They provide value to prospective buyers to help them make informed decisions and also protection for lenders to ensure they don't get stuck with a loss if the buyer ends up defaulting on their loan.
The downsizes are the costs and time involved. They obviously cost money and may end up telling you what you already know. They also take time and in some cases that time isn't available such as in hot markets where properties list and sell on the same day.
When to use?
Whenever making a large purchase, such as buying a real estate property, it is crucial to ensure that you are not paying too much. Home appraisals provide an unbiased opinion to help you make the right decision and avoid getting stuck with an expensive property worth less than what you paid for it.