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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.
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.
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.
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.
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.
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.
Many times an underwriter will require an appraiser to address and justify the value they came up with for your property. The underwriter may ask for an additional similar property in your development or neighborhood. They may also require a written explanation for the comparable properties they used.
» DISCLAIMER: The information contained in this article on 'Real Estate Appraisal' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.
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