Residential Appraisals: The facts about Real Estate Appraisals. Real Estate Appraisals are a necessary step in the home buying process. There is a lot of confusion out there regarding the truth about appraisals. Some people are confused about their purpose and often think of them as home inspections. Some people think that a low appraisal for their home is the kiss of death. People should take the time to learn the facts about real estate appraisals. The more people learn beforehand, the better prepared they will be to tackle this crucial step.
Your home loan approval is contingent upon the results of the real estate appraisal. It is as simple as no appraisal…no loan. Since very few people have the ability to pay for a house with cash, the appraisal is going to be necessary. A loan is never going to go through without an appraisal. The purpose of the appraisal is to establish the home’s market value. The sales price will be based on the market value.
The main goal of the appraiser is to protect the lender. Lenders don’t want to be stuck with property that is not worth its price tag, so the appraisal must be completed before the lender will approve the loan. The information contained in appraisal is invaluable to the lender. The lender will study the details of the appraisal before reaching a final decision. It makes sense. If they are going to be funding the transaction, they should be aware of the property’s value.
The lender will often dictate the choice of appraiser. It might have one in house or through a contract with an independent appraiser. If you go with your own choice for appraiser, they may be subject to final approval from the lender.
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an appraiser compares the property to similar properties that have sold in the area and bases the market value on the comparable properties. The cost approach is based on the costs to build, which means it is more appropriate for new properties.
The actual appraisal reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The appraiser will then list any issues that he or she feels might diminish the property’s value.
The next component is a list of any serious problems like bad roofs or weak foundations. The appraiser then gives an estimate of the sales time for the house. Finally, the report will indicate the type of property.
It is important to note that the real estate appraisal is not the same thing as an inspection. The appraiser might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not. They are only responsible for assessing the property and determining the market value for the lender. A home inspection is a different process altogether.
Real estate appraisals only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
Everyone fears the possibility of a low appraisal. It happens all of the time, usually during closing. There are some things you can do to remedy this common but stressful situation. The buyer can make a larger down payment. If this is not feasible, the seller and buyer can negotiate the price some more. Additionally, the appraisal can always be disputed.
What all goes into an appraisal? Appraisers are looking at the condition and size of the house, its proximity to good schools, and the size of the lot. Appraisers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don’t work.
You can also dispute a short appraisal. Lenders cannot communicate directly with appraisers, but you can. If you think the appraiser overlooked important information about the home or comparable properties in your neighborhood, you can either reach out to the appraiser, or you can hire a different appraiser for a second opinion (at your own expense). If you do seek a second opinion, make sure that the appraiser is state-certified and approved to work with your lender.
You can also walk away. If the sellers accepted your offer, but the appraisal comes in too low, you don’t need to purchase the house. Often, the sellers will negotiate at this point, because otherwise they’re back to finding another buyer.
How to avoid a short appraisal. Before making an offer, do your homework. Keep an eye on the real estate listings for the neighborhood where you’d like to live. How much do houses sell for? Are they on the market for months, or are they snatched up quickly? You may not have access to all of an appraiser’s tools and calculations, but a lot of data is available on the Internet and through public records.
Few Tips for Getting the Most out of Your Home Appraisal if you are a Seller hopping to get the top dollar for your property, a buyer eager to have a lender sign off on a loan or a homeowner wishing to complete a cash-out equity line refinance or getting more bang for your buck out of an appraisal. Low ball appraisals can kill deals, but fortunately there is a lot you can do to help boost the appraisal value of a particular property.
- If you have made improvements and updates to your home over the years it is a good idea to detail these upgrades in a report and hand this list over to your appraisal. Remember, part of the appraisal process is looking at your home’s previous sales and comparing the property to similar houses in the neighborhood. If you’ve added an additional bathroom, bedroom, garage, screen porch, additional heated square footage, finish-out basement and the records don’t show, you’ll want this fact rectified and taken into consideration. The same goes for updates done on your kitchen and bathrooms. If your home was built on or before 1975 but you updated, gutted and replaced the electrical, plumbing and heating system recently, this is something that your appraisal shall know.
- It’s important to remember that the appraisers are people, too. Don’t presume they’ll use their professional experience to look past children’s toys scattered across the home and backyard or dirty dishes. First impressions matter just as much with your appraiser as they do with potential buyers. Always do your best to maintain the look and feel of your home as clean and cared as possible.
- It is okay for your house to look lived in, but certain things like carpet stain, signs of rodents or insects, overgrown landscaping will affect the overall rating of your home. If your home looks uncared for your appraiser may start to wonder if a lack of attention to maintenance issues are present as well.
- Curb appeal matters! It really does. Maw the lawn, pull those weeds and do the edging. Add some potted flowers by your front door and replenish the flower beds. Giving your landscaping the fresh look is very important! You want to distinguish your property and make it stand out on the day the appraiser is set to arrive.
- A fresh coat of paint provides more return of your investment than any other home improvement! Not only a fresh new look yield to a higher appraisal, but you will more likely to sell the home more quickly at a price closer to what you are asking.
- An experienced real estate agent can also help you determine whether an offer is reasonable and likely to get a favorable appraisal.
Appraisals are not being conducted by just anyone off the street. Real estate appraisers are trained professionals licensed by the state in which they work. They are qualified for the work they do by completing state certification requirements like exams and continuing education courses. This line of work demands strong critical thinking skills and the ability to interact with different groups of people.
When you are buying real estate it is important that you have professional representation, and you should not settle for anything than the best. The Kimmig Team is representing all types of buyers and sellers, from luxury homes, to first-time home buyers. We are here to help you and in deciding about the Re-sale Value of your future real estate purchasing. Visit our website at www.atlantaluxuryhome4sale.com and start searching for 1000’s of homes today! Take advantages of lower interest rates and start living your dream.
Remember: The facts about Real Estate Appraisals – Real Estate Appraisals are a necessary step in the home buying process.