Appraisal

  • By Admin
  • October 23, 2014
  • Comments Off on Appraisal

Home Equity Line

In most cases, lenders require a professional, independent appraisal of the property you want to buy or refinance to ensure that it is worth at least as much as they are being asked to lend on it.  If you are making a smaller down payment and/or have lower credit scores, the lender bank is going to be even more interested in making sure the property that will be the collateral for the loan is worth lending the amount requested.

An appraisal is simply an OPINION of value, from someone who is licensed to give such an opinion.  Opinions vary from individual to individual.  Likewise,

Lenders have been known to “cut” appraisal values as a an added measure, particularly during times of financial turmoil.  All banks have their own appraisal review department; these departments will scrutinize the comps used to arrive at the appraisal value, and make adjustments to it.the appraised value of the home will vary from appraiser to appraiser. However, appraisers base their opinions on comparable sales, or “comps” (what similar houses have sold for in the area recently), as well as other factors.  Since the factors used to determine value are the same for every appraiser, most appraisers will give similar opinions about the value of the house.

Comparable sales of similar properties is an approach to evaluate most single family residence. Other approaches, such as the Cost Approach and Income Approach are also used for different types of properties. The Cost Approach is an estimate of the cost to rebuild the property of similar characteristics as the subject property. Income Approach is often used when the subject home generates rental income, such as duplex, triplex and quadplex.

An appraisal should not be confused with a home inspection. Where an appraisal deals with the home’s value a home inspection is performed for the functionality of the systems and structure. An appraiser will inspect the house only to the degree of viewing what is in the house i.e. does it have Central A/C or window units etc… The inspector will check the systems to insure they are working properly.

An appraisal is a great tool for finding out how to add value to your home once bought. Looking for features that comparable sales in your area have that you do not will show you which items can be added to your home to increase value.

A professional written opinion, about the value of a property, like a House, Condo, or other residential unit. Commonly required when a residential unit is sold, taxed, insured, or financed.

The more similar the subject property is, in terms of size, age, design, quality, sitelines, condition, etc., to other nearby properties, the more accurate the appraised value will be. The more unique the property is, the less accurate the appraisal will be. Because of this, a unique property with no or few good comparable properties could be considered a higher risk by the lender. In some cases the lender will cut the value on the appraisal to mitigate this risk.

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