Being a homeowner comes with legal responsibilities. If you are buying or selling a home, understanding what appraisals are about is an essential part of knowing that you will be getting your money’s worth. Before you decide to purchase or sell your property, you can have it appraised to have a professional basis on how you will be pricing a home or how much you will be investing in a property and if this amount of money you will be shelling out is truly worth it.
What exactly is an appraisal?
Simply put, an appraisal is a written estimate indicating the property’s value in the market. This value is determined by an appraiser and the value of a property is based upon factors such as recent prices of properties within the same category or style, as well as the property’s current condition.
An appraisal will be given by the appraiser, and he or she is considered as the third party who will offer the objective point of view concerning the price of a home. The evaluations will be based on market research, the appraisal’s knowledge of the market, and their overall evaluation of the property in question.
How is the value of a home determined?
There are three standard approaches when it comes to determining the value of a property:
· Coast approach – Estimates include the cost for repairs and deductions for physical deterioration is given. The land value is added into the equation as well.
· Comparison approach – Properties of similar size, style, and built are taken into comparison. Quality and location are also compared, and the price will be based on similarities and difference. Deductions or additions can be given for smaller bathrooms, or an additional room, and the likes.
· Income approach – Generally applicable for properties that are commercially owned, the value of a property is based on the net revenue that the property at its certain location gets to produce.
Why is an appraisal required?
Homes can differ in value, and when there is a lender concerned, an appraisal can be used to determine how much the loan amount should be. Lenders usually do not lend more than the home’s total value, and the value of the appraisal will be used for determining the loan ratios which will be agreeable to all parties.
How is the appraisal performed?
Appraisers are hired for the purpose of giving an objective opinion of a property’s value. They are trained and skilled professionals knowledgeable in the market, and are licensed professionals by the Division of Commerce. These professionals do not deal with valuables, and they usually have a certain liability insurance so that in case accidental property damage occurs during the appraisal, they are covered.
The lender will be the one who picks the appraiser, and that makes them work for the lender and not for the seller or the borrower. Appraisals usually do not take long, and may last only 10-15 minutes depending on the size of the property.
Factors such as the size and age of a home, size or land area of the property, location, home features such as number of bedrooms and baths, architectural features, or major renovations are taken into consideration. A seller can prepare the home for appraisal by making sure all maintenance work is done before the appraiser arrives, and that all is in working order as well.