The Abcs Of Appraisals
If you are looking to sell your home or take out a mortgage; or even just complete a refinance, you are going to be required (or at least strongly urged) to have your property appraised.
An appraisal is an estimate of the property’s value.
It is often times confused with an inspection; which is just a look-through of the structure’s mechanical, structural and electrical engineering and does not give a value of the home.
Be sure to distinguish and realize the differences between these two things.
A recent article from foreclosurenet.com, “Appraising properties – The nuts and bolts of real estate evaluation,” discusses some important things that homeowners should know about getting their property appraised.
“An appraisal is an opinion or estimate of a property's value. It is an evaluation determined by someone qualified to estimate the value of real property.”
But before you get started with an appraisal, make sure one thing – and that is the person or company is legitimate because there are a lot of scam artists in this industry.
Yes, most people who conduct appraisals are legitimate but there are the few “bad apples” that inflate values and give false numbers.
“And who determines who's qualified? Two different trade organizations: The Appraisal Institute, (a merger between The American Institute of Real Estate Appraisers & The Society of Real Estate Appraisers) and The National Society of Real Estate Appraisers. Both organizations hold their members to rigorous standards. Certifications are based on continuing education requirements, ethical standards, and grievance and enforcement procedures.”
If you are taking out a new mortgage (because you just bought a house, or are doing a refinance of some sort) your lender will require you to get an appraisal so they can be sure that they are not lending you too much or too little.
“This appraisal, which attempts to justify the contract price to the lender, usually takes place after the contract between buyer and seller has been finalized. The appraiser is usually given the contract price before he proceeds. Appraisals are also performed to determine a reasonable offering price in a sale, property value for estate tax purposes, value of land versus the structure, and for insurance and tax purposes.”
There are many different factors that go into determining a property’s value; and homeowner’s will find all of this information in the appraisal report.
“Subjects covered include; Neighborhood, Site, Improvements, Interior Finish and Equipment, and a Valuation Section that includes the method(s) of appraisal used and a Market Data Analysis comparing similar properties in the neighborhood. A Photographic Addendum is usually attached, showing the property from various views, and Area & Tract Maps identifying the property's specific location.”
What homeowner’s must keep in mind is that an appraisal is just an estimation. The appraisers are required to give what they believe to be “The Fair Market Value” of a home.
There are various ways to help determine the value including the most popular which is to look at comparable homes in the area and see what they sold for.
“An appraisal can help you avoid over-paying for a property. If an appraisal comes in low, find out why. It may be that the appraiser missed something significant about the property. It may also be normal for the market price of a property to be 110% - 120% of the appraised value. This is true in many markets.”
Expect to pay anywhere from $100 to $400 for your property to be appraised.