Real Estate Appraisal
One of the important steps in the home purchase process is a home or real estate appraisal. This process helps in establishing a home’s market value and its likely sales price in an open and competitive market.
A lender will require an appraisal if you are going to ask to use a home or other property as security for a loan because it wants to ensure that the property sells at least the amount of money it will lend you.
The process of a real estate appraisal includes the following:
There are two methods used in appraising residential properties, the Sales Comparison Approach and the Cost Approach.
In a sales comparison approach, the appraiser will make an estimate of the property’s market value through a comparison of similar homes in the area that have sold. The properties used are called comps or comparables. Since no two homes are exactly alike, the appraiser should compare the comps with the subject property, make paperwork adjustments to make their features nearer to the subject property. The resulting figure shows what every comp would have sold if it had the same features as the subject home.
The cost approach is most beneficial for new home where the building costs are known. The appraiser will make an estimate of how much the replacement of the structure would cost if it were destroyed.
While some areas do not require certification or license, a real estate appraisal in general is performed by a certified or license appraiser. Keep in mind that appraisals are very subjective, thus they are prone to manipulation.
Make sure that you are around during an appraisal. Your presence could help influence the home appraisal in a positive manner. The more upgrades you will be able to provide the appraiser, the more precise he or she will be able to evaluate the condition of your home.
Inquire about comparable homes and take time to visit the homes in advance. Your real estate agent can help you in this regard because they know the best appraiser around and they know a lot about the area. It is much better if your agent is also present during an appraisal.
Real estate appraisals are very important, especially if you are trying to sell your home. Take an active participation in the process to be able to maximize the value of your home.
Appraisers are people too, which means that they do not know everything and are open to influence. The more you can help them evaluate and understand your home, the better the appraisal will turn out.
