Real Estate Appraisal - A real estate appraisal is an opinion of value of a certain property. The appraisal is used, and usually required, in the mortgage process. Lenders want to know how much your home is worth, so they can accurately assess the risk they assume by lending you money.The appraised value of a property is highly dependent on the appraiser's experience in the local real estate market. The appraiser's knowledge of the neighborhood where the property is located, his ability to acquire usable comparables, and his experience in the type of property being appraised play an important role in the accuracy of the appraisal report.
An appraisal will measure any appreciation or increase in value of the property due to market conditions or other causes such as home improvement or repairs.
Underwriters sometimes insist that the appraiser use sales of properties within .5 to 2 miles of your home; that the sales used have taken place within the past 6 months; and that only minimal adjustments in value are made to the sold properties to make them "comparable" to your property. In more rural areas, with lower per-square-mile population densities and fewer sales in any given time frame, these lender parameters may be difficult, if not impossible, for the appraiser to adhere to. In these cases, an underwriter may require a second appraisal supporting the findings of the first report.
Generally, improving kitchen and bathrooms will have the greatest impact on value. Use caution when deciding whether or not to enter into a big project. You can actually "over-improve" your property - make sure the things you do to your home are consistent with the price-range and neighborhood where your home is located.
Please remember that an appraisal is only an opinion of value. Your appraised value does not necessarily mean that you can put your house on the market and expect to get the exact amount that your home appraised for. Your home might appraise for 150,000 dollars but you may only be able to sell your home for 140,000 dollars. Or, it could go the other way and your home only appraises for $150k but you might get someone who is really interested and offers you $160k. Therefore an appraisal is just one person's opinion and a gauge used to determine the approximate value of a property.
There are different types of appraisals that can be performed on your home depending on the lenders requirements. Most lenders will require the appraiser to view both the inside and outside of your property. If you are refinancing there are some lenders that will only require a "drive by" appraisal, where the appraiser never sets foot inside your home.
What Is An Appraisal - An appraisal is a written report of the estimated value of a property prepared by a certified real estate appraiser.
Most appraisals require the appraiser to inspect both the interior and exterior of the home. This type of appriasal is typically used to get the most accurate value for your home. The appriaser is able to take certain items into account that would not be possible on a drive by appraisal. For example custom cabinets, fireplaces, master bathrooms with a whirlpool tub, and hardwood floors are items that an appriaser could not account for if you just had a drive by evaluation of your home.
There is always the possibility that your appraisal can be inflated. This means the loan officer will ask the appraiser to raise the value over what the house is really worth. The danger to the borrower is you may wind up with a loan more then the house is worth.
There are three basic ways that a property appraiser uses to obtain an opinion of the value. First is the income approach which is used primarily on commercial properties. On residential properties there is the cost approach and the market approach. The cost approach assertains value by how much it would cost to build the home in its present condition. The market approach has to do with how much the house would be worth if it was sold on the open market. For the purposes of a mortgage loan, the most weight is given to the value obtained by the market approach.
There are several types of appraisals, that each have their own forms. A drive by appraisal, is when an appraiser simply drives by your home and gives an estimated value to your property. They will still take photos and find comparables, the advantage is that they are more convenient to you and generally cost less. The drive by appraisal, is the underwriters decision and not yours or your mortgage professionals.
Appraisal Report - An appraisal is a report that provides an opinion of value of the subject property and supports that opinion with the utilization of 3 approaches: a comparable sales approach, a cost approach, and an income approach. The appraisal is completed on a standardized Uniform Residential Appraisal Report form called a 1004 form.
An appraiser is a professional that specializes in developing opinions of property value for their clients.
Appraisals are used by lending institutions to make a decision of whether to lend on that particular property. The appraisal report will outline any apparent problems or hazards with a home.
The accuracy or lack of accuracy in a residential appraisal has just about everything to do with the comparable sales or comps as they are known. The more similar to the subject and recent the comps are, the more likely the lenders underwriter will accept the value stated on the appraisal report without question.
If an appraisal is found to be insufficient, inflated or no good by the lender's standards the lender has the right to refuse to accept the appraisal. Many lenders will either cut the value or simply request a new appraisal to be completed if they are not satisfied with the original appraisal.
A home appraisal is the process to estimate the value of the property. The appraised value is merely the opinion of the certified appraiser, based on the appraiser's experience, knowledge of the neighborhood the property is located, and knowledge of similar properties recently sold.
An appraisal will generally use the comparable approach for determining it's final opinion of value on a property. The other approaches can weigh in or factor into the final value decision but usually it will be the comparable approach that is most important. Keep in mind also that an appraisal is only an estimate of value and is not guaranteed to be the exact value of what you can get for your home if you were to sell the home. You could have your home appraised by 10 different appraisers and they could possibly all come up with a different final number. They should be fairly close and consistent with each other but they could easily all be slightly different in final value.
