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The reason the lender requires the real estate
appraisal is because they want to ensure that
the property would sell for at least the amount
of money you require for your loan. Simply put,
if the lender should ever have to foreclose,
they want to ensure they would be able to get
their moneys worth.
A real estate appraisal is not to be confused
with a comparative market analysis (CMA). Real
estate agents commonly use a CMA as a tool to
determine a realistic asking price for home
sellers. Although, an experienced agent may come
extremely close to an appraisal price with the
CMA, an real estate appraisal’s report include a
lot more detailed information, not to mention
the fact that it is the only evaluation report a
bank will accept when making the decision of
whether or not to loan money.
When having a home appraised for this purpose
you should have an appraiser that is an
objective third party. The appraiser should have
no financial or any other connection with either
party involved. If you have never experienced a
real estate appraisal before, here are a few
things that are included in the report.
There will be many details about the property in
question as well as side-by-side comparisons of
three different properties like it. There will
be an evaluation of the areas overall real
estate market. Any issues an appraiser feels can
be harmful to the value of the property.
Notations about any serious flaws will also be
made; these are all coupled with many other
items on the detailed appraisal report.
Real estate appraisals come in two different
methods for appraising homes. There is the sales
comparison method where the market value is
estimated by comparing the property to other
similar properties that has been sold in the
same area. This method uses the similar
properties to make several estimates of what
they would have sold for if they had the same
feature as the property in question.
Then there is the cost method, this is generally
used for new properties when the costs of
building is known. In this method, the appraiser
estimates the costs involved in replacement of
the structure if it were to be destroyed.
It is important to note that you should not
depend on an appraisal to help you determine if
the home is in satisfactory condition. This is a
job for a home inspector. During a real estate
appraisal, the appraise may take notes about
obvious issues, however they will not test
appliances, inspect the chimney or roof. |
