Beginner’s Guide on What to Know for a Real Estate Appraisal
In the U.S, approximately 5.34 million homes were sold in 2018. Most people tend to undervalue their homes while others buy houses at unreasonable prices due to lack of adequate real estate appraisal knowledge!
Estimating the market value of a property is not as complicated as people think.
If you are unclear on what a real estate appraisal is or consists of, here is a comprehensive guide with all the information you need to know.
A real estate appraisal refers to an educated guess about the value of a property. These appraisals are essential in the sale or purchase of property, especially when seeking funds from lenders. The value stated can make or close a deal within no time.
It’s worth noting that the seller is required to pay for real estate appraisal at closing.
Home Inspection versus Home Appraisals
Most people tend to confuse these two terms, which are entirely different. Both an inspector and an appraiser visit a home and take a look at it for various reasons. An inspector checks for defects while an appraiser estimates the value of the home.
A home appraisal comprises three major parts:
- The inspection
- Research on comparables
- The final appraisal report
How long does a Real Estate Appraisal Process Take?
It took a few days in the past, but after the recession, the federal guidelines require it to take a week or two. If underwriters request for past information about the property, it might take a long time for the real estate agent or seller to collect photos and data.
The appraiser looks at the characteristics of your property, including the condition of the home, state of repair, number of bedrooms, its square footage, and other vital features. All these factors are considered to estimate the general market value of the property.
The appraiser checks every room and takes note of the details required to measure the value of the home and compare it to others in the area. Once all details are collected, the appraiser conducts research on recent sales of homes that are nearly identical to yours. The final appraisal price is stated after a comparison is made.
How to Improve the Appraisal Process
Most people wonder if they can do anything, but unfortunately, the seller is powerless once the appraisal process starts. However, you can take these steps to improve the process before the appraiser comes:
- Ensure that everything looks attractive by trimming bushes, weeding the landscape, and turning on lights among other things
- Make improvements or repairs where necessary. For instance, replace old roofs with new ones and repair cracked walls. Be careful not to spend a lot on repairs because they may at times not add significant value
These steps sound like common sense, but most sellers overlook them leading to undervaluing of property.
Importance of Upgrades
When refinancing, an appraiser considers all verified upgrades. For these upgrades to add significant value, they must be permanent. Items that aren’t considered as upgrades are pools, garages, and basements.
It’s advisable to finish upgrade projects before the appraisal process starts to avoid creating an impression at the property has hidden flaws.
Why a Good Real Estate Agent Matters
Your agent meets the home appraiser, and shares home improvements noted and offers additional helpful data as well. An outstanding agent comes armed with information used to compare other similar homes to justify the price. The agent should offer the appraiser information that cannot be gathered by just walking around the house.
Types of Appraisals
The kind of appraisal used in most cases is when a real estate appraiser visits a home and inspects its interior and exterior.
A drive-by appraisal refers to that which the appraiser only inspects the exterior of the property. This appraisal isn’t comprehensive enough and is mostly used when a lender trusts the homeowner. Read more to understand how appraisals work.
Is an Appraisal Necessary?
Property appraisals are required for home sales that need a mortgage. It is essential to see the services of an experienced appraiser to get an accurate value of a property.
Sellers want to earn as much income as possible from a sale while buyers only want to incur the minimum cost, so a real estate appraisal solves these conflicting interests. It ensures fairness to all involved parties.
Lenders, on the other hand, need appraisals to find out whether the property can cover for all costs in case the buyer defaults payments.
How Appraisers Are Hired
The lender uses a third party company to hire an appraiser. Lenders and appraisers shouldn’t communicate directly to avoid irregularities. It is advisable to hire a certified appraiser who has completed internship hours and the licensing coursework.
Ensure that the appraiser has no connections with the party you’re transacting with to ensure that you get a fair deal.
Who Gets the Appraisal Information?
The appraisal is only provided to the person who orders it not necessarily the one who pays for it. In other cases, the homeowner may pay for it to minimize delays.
In case the lender orders it, the buyer cannot access it. In such situations, the lender only informs the seller or buyer the value of the property according to the appraisal.
When the buyer pays for it to get a mortgage, the law requires that the mortgage holder gives the buyer a copy of the report.
Is the Appraisal Final Regarding the Value of the Property?
If you doubt the value stated by the appraiser, your real estate agent can talk with the property appraiser to seek understanding of the decision made. Everyone makes mistakes, so the appraiser might have made mistakes that need corrections.
If the appraisal is unpleasant to you or seems inaccurate, you can always ask for another.
How often is An Appraisal Needed?
Usually, they are considered valid for not more than six months. In case the property is located in a place with rapid price fluctuation, three months is the maximum period given.
Pricing issues is one of the main reasons why homes take longer to sell. With this information, you’ll sell a house quickly and without any challenges. Check out our blog for more information on real estate appraisal.