#ForgetMeNotFriday – April 21, 2017
WHAT IS A HOME APPRAISAL?
You’ve found your dream home. The asking price is $300,000, an amount you’ve already been pre-approved for by your bank. But is the home really worth that amount? That’s the question at the heart of the home appraisal. The worth, or value of the property, will determine how much a lender is willing to give you to buy that particular piece of real estate.
This all-important step in getting the financing you need is the home appraisal, an oftentimes, confusing part of the mortgage process, in which both buyer and seller must depend on the expert opinion of a stranger. A real estate appraisal is simply that, an expert opinion of a certified, state-licensed professional who determines the value of a piece of property.
When you apply for a mortgage, your lender typically requires the property to be appraised by one of their approved appraisers. This practice helps create more consistent appraisals and gives you assurance that the appraiser is properly licensed and certified. Even though the home appraisal is a lender’s requirement, it’s the borrower’s responsibility. You, the borrower, usually pay for it as part of the mortgage costs at the time of closing. The cost is typically around $300 but can be more depending on the price of the property.
The primary appraisal method, for residential property is the sales comparison approach. The appraiser compares the property with three or four similar homes that have sold in the area, often called a comparable, or a comp. The analysis considers specific components, such as lot size, square footage of finished and unfinished space, style and age of house, as well as other features such as garages and fireplaces.
The appraisal report generally includes:
- an explanation of how the appraiser determined the value of the property
- the size and condition of the house and other permanent fixtures, along with a description of any improvements that have been made and the materials used
- statements regarding serious structural problems, such as wet basements and cracked foundations
- notes about the surrounding area, such as new established development, rural acreage, and so on
- An evaluation of recent market trends of the area that may affect the value
- a comparative market analysis that supports the appraisals
- maps, photographs and sketches
A home appraisal also protects the bank from getting stuck with property that’s worth less than they’ve invested. And it protects you from paying too much for a house simply because it was love at first sight. The home appraisal is a no-nonsense factor in a decision that is often emotional for the buyer.
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About the Author…
Mitt Conerly, Sr. has been a licensed Real Estate professional for over 40 years. He also founded Real Estate Training Institute. He has taught hundreds of real estate professionals over the past 30 years. He is an Associate Broker and Senior Partner at Metro West Realty in Carrollton, GA.