A house appraisal report is crucial for establishing the market value of a property. It tells the seller how much he can ask, and guides the buyer towards the right price of the property. It is nearly impossible for buyers to secure a mortgage without an appraisal report. Despite being such a crucial part of home buying and selling, appraisals are still shrouded in mystery. Some people say that smelly pets can reduce the appraised value of your home, while others steadfastly hold that even a new plumbing process does not increase its value.
In this article we will lift the veil from this ubiquitous and yet so mysterious appraisal report by listing eight essential facts regarding house appraisal reports:
(1) Appraisal is not a comparative market analysis
Comparative market analysis (CMA) is the method to figure out the value of a property by looking at the sales of similar properties in that area. Appraisers use a CMA to reach at a figure. Their task does not end with a CMA. It is more detailed.
(2) Appraisers are state-licensed
States license appraisers are licensed for the work they do. Appraisers have to undergo hours of internship and training to earn an appraiser’s license.
(3) Appraisers are third-party
Appraisers are individuals or teams that have no connection with the deal. They are not among the people who will benefit from the deal.
(4) An appraisal report contains detailed comparisons
Fannie Mae and Freddie Mac publish a detailed account of what an appraiser’s report contains. An appraiser’s report contains a detailed comparison of at least three similar properties, an evaluation of real market data, notes on structure, and an estimate of the average sales time among others. Appraisers also include characteristics such as how easy it is to access public transport and other such factors in their report.
(5) Two common appraisal methods
A common method is to compare the sales of similar properties in the area to come at a figure. An appraiser notes how similar properties in the area have been selling and uses that data to make an estimate. The second method is generally used for newer properties. It takes into account building costs, such as how much it will cost to rebuild the house.
(6) Correct appraisal is important
Lower appraisal may seem to favor the buyers, but it does not. Banks are usually reluctant to lend to properties with lower appraisals. Higher appraisals can secure buyers a quick home loan and more cash to sellers, but they hurt buyers in the long run. If a property worth $200,000 is appraised at $250,000, a mortgage may be easy to secure but appreciation on this kind of property will be less – it may cost only $240,000 after five years.
(7) The appraiser does not do a home inspection
An appraiser looks at some common structural problems and makes a note of them, but he is not a home inspector. So your dirty pets have no role in the report.
(8) You can have several appraisal reports
If your appraiser has appraised your house too low, you can hire another expert for a second appraisal report. You can also get an online value report to see the error margin.
Getting an appraisal is really simple. And once you get the report, the house value becomes clearer.
Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm as well as match you with potential lenders! To assist you in the refinancing process, you can get a free home value report from Neighborhood IQ and find out what your home is really worth.