Understanding real estate property appraisals – What do you need to know?
Lenders utilize this valuation to assess whether the home’s value aligns with the loan amount requested or offered. During an appraisal, the appraiser (a professional licensed to provide valuations) will physically inspect the interior and exterior of the home. They’ll look at the number of bedrooms, bathrooms, overall square footage, layout, condition, and unique features. They’ll also measure the home and check for upgrades like new kitchens or bathrooms.
The appraiser will capture images and record observations about the home’s state. They’ll look at other recent sales of comparable homes in your neighborhood to help determine an accurate value for your home. Location, school districts, crime rates, and other factors are considered. After the inspection, the appraiser will use comparable sales, photos, inspection notes, and professional judgment to come up with a fair market value for the property. Detailed reports are prepared based on the information gathered.
Importance of an appraisal
As a buyer, an appraisal helps ensure you don’t overpay for a home. The appraised value from a neutral third party gives you an objective estimate, which protects your interests. If the appraisal comes in lower than the purchase price, the buyer and seller will need to negotiate to find a mutually acceptable price. For sellers, an appraisal provides assurance you’re listing the home at an accurate market value. It gives buyers confidence about the asking price. If the appraisal is higher than expected, it also means more equity for the seller. Lenders depend on property appraisals to ascertain that the home’s valuation is sufficient to guarantee the loan in case the purchaser defaults. Most lenders require appraisals on financed home purchases. While appraisers aim to provide an unbiased estimate of value, there are a few things sellers do to maximize the appraised amount.
- Make sure the home is clean and decluttered. A messy or dirty home negatively impacts the appraiser’s perception.
- Do minor repairs and touch-ups. Fix leaky faucets, patch holes, repaint rooms, etc. Anything that improves the home’s condition helps.
- Highlight upgrades and improvements. Mention remodels, renovations, or brand-new systems to the appraiser. Provide documentation if possible.
- Share information that adds value. Mention things like desirable school districts and low crime rates that impact market value.
- The appraiser relies primarily on their professional judgment – not the opinion of the homeowners. Taking time to prepare for an appraisal is worth the effort.
Sometimes, the greatest preparation isn’t enough, and an appraisal still comes in lower than expected. If you have evidence the appraiser missed something important, appeal for them to take a second look. Digging up other recent comparable sales the appraiser didn’t consider is persuasive. The Real Estate in Phangan buyers and sellers try to negotiate a purchase price between the two amounts. For a fee, you dispute the first one and request an entirely new appraisal. The buyers may be able to pay a larger down payment to cover the gap between the estimate and purchase price. As a last resort, either party decides to walk away if no agreement occurs.