How Do Appraisers Determine A Homes Value?
Synopsis Of An Appraiser
An Appraiser is a key component when selling your home to anyone other than an all cash buyer. An appraisal is an unbiased professional opinion of a home’s value, and is used whenever a mortgage is involved in buying or refinancing. An appraisal is based on an in-person inspection, comparison of recent sales of similar properties, market trends, and aspects of the home. (Ex: Floor plan, square footage, and amenities.) In a purchase an appraisal is used to determine whether the home’s contract price is appropriate, based on the home’s location, condition, and features. An appraisal assures the lender isn’t handing the borrower more money than the home is worth.
How Are Home Values Determined?
A properties appraised value is determined by recent sales of similar properties & market trends. The square footage of the property, number of floors, amenities, and the floor plan functionality are all other factors that come into play. The appraiser will perform an interior and exterior visual inspection to make note of anything that may be affecting the property’s value. To note again, an appraiser must have no direct or indirect interest in the transaction. Appraisers remain unbiased. Most of the time an appraisal takes 7-10 days to receive and costs $400-$500. When the appraiser arrives at the property they will begin inspecting, measuring, and evaluating all fixtures and features. They then can create an Appraisal Report. After the report is done it then is in the hands of the Underwriter. The Underwriter will use that report and go over other documents associated with the property to weigh the risk of the loan. Based on all the information provided, it will determine whether the loan is approved or declined.
-A street map showing the appraised property and comparable sales used
-An exterior building sketch
-An explanation of how the square footage was calculated
-Photographs of the home’s front, back, and street scene
-Front exterior photographs of each comparable property used
-Other pertinent information—such as market sales data, public land records, and public tax records—that the appraiser requires to determine the property’s fair market value
What Lowers A Home Appraisal?
A Properties locations the biggest impact on the valuation. If in an ‘undesirable’ neighborhood or next to busy streets, power lines, or being near a junkyard all play factors into the lowering of a homes value. Although you can’t change the homes location you can do things that might help boost your homes value positively, like working on your homes curb appeal by staying up on exterior maintenance and keeping the property well lit.
What Homebuyers/Sellers Should know
When buying a home an appraisal is one of the steps in order to proceed with the purchase. If the appraisal comes back at or above contract price, then the transaction will continue as planned. If the appraisal comes in low or under asking price you will run in to some delays. Of corse there’s always room for negotiation, but the bank won’t lend you more than what the appraisal has determined to be the homes value. Sellers may run into situations where they need to reduce their asking price. There are always different situations and scenarios, every transaction is different, but an appraisal is always required.
