What is a Property Appraisal?
Today, we will be going over what happens during the property appraisal process. We will also be discussing what an appraisal is and how do the appraisers come up with the value.
What is an Appraisal?
An appraisal is a valuation of a specific property’s worth. Typically, appraisals are done by banks when someone is buying a property to determine the value of that home. The banks usually evaluate since they are the person who is lending the money for the person to buy the property, and they don’t want to lend more money than what the property is worth. So, the bank wants to have the security that the value they are lending on the property is there. This is why most people do appraisals.
However, there are numerous factors why someone would get an appraisal, but for the most part, estimates are about loans. It’s important to remember that licensed appraisers complete evaluations. However, just because a appraiser is licensed, doesn’t mean they are a competent appraiser. Generally, you want an appraiser who is familiar with the area they are appraising. You don’t want someone who is assessing your property to be from three counties over. So, while all appraisers are licensed, they not all the same. Therefore, make sure that whoever you choose to do your appraisal is familiar with the area and the community so you can get the best value for your home.
How Does an Appraiser come up with the Value of your Home?
Before an appraiser goes out to a property, they look at comparable properties. Your appraiser will already know the address of your property, and in most cases, they know the bedroom, bathrooms, the lot size, the square footage, and pictures of your property that are online. In purchasing situations, your appraiser will have a copy of the purchase contract, so they know the value that someone is paying for the house. Therefore, the appraiser will know where they need to bring that value so the property can be appraised.
When it comes to refinancing, the appraiser won’t know the value of the property, so that will be the difference between the two. Furthermore, if you’re refinancing, the appraiser shouldn’t know the value of the property that way, they can make an unbiased opinion of what the property is worth.
Once the appraisers have that data on the property, they look at the comparable homes before they go out to the property because they want an idea of the value. Ideally, an appraiser is finding properties that have the same number of bedrooms, bathrooms, and similar square footage on similar lots. If they can find a model match, that would be perfect since model matches have minimal differentials, and it will be easier for the appraiser to make adjustments.
With that said, appraisers won’t always be able to find identical properties, and the majority of the time, that will be the case. At that point, the appraiser will have to make adjustments to the appraisal itself. So, if the comparable property they are looking at has more bedrooms or has more value, then they will have to adjust to that.
When an appraiser is looking at comparable properties, they should have three properties that are sold, and three active listings on the market. So, an appraiser will have six total properties that they will use to come up with the appraised value of a home. When the appraiser gets to your property, they will be looking at the condition of the property and drawing a diagram. Furthermore, they will put the measurements on that diagram since that should also be included in the appraisal.
Although the county records will have measurements on these, that doesn’t mean those measurements are entirely accurate. So, the appraiser will still need to double-check the square-footage of the property. Because in some cases, additions have been made. Then, even though they might be permitted, the city doesn’t always update their records. Once the appraiser has measured the property, they will be going to collect data on the other comparable properties to formulate their opinion of value.
An appraisal is nothing more than someone’s opinion of the value of your home. When it comes to a purchase, the appraiser brings in the value of the property at the purchase price. A good appraiser is not out there to appraise the property at the maximum amount. The appraiser wants to get to the number that the bank needs to satisfy the loan.
On refinances, it’s a little bit different; an appraiser should appraise your property for the maximum amount that it’s worth. However, you may have five appraisers go to a property, then you might have five different opinions of value. There are different methods when it comes to deciding on the value of your property, although most appraisers use the sales comparison method.
Therefore, you have to take an appraiser’s value somewhat lightly. They should all be pretty close, but not all of them are going to be the same.
In Summary
Though a home appraisal can seem like a nuisance, it can genuinely help you as a buyer. Having knowledge on how the process works will allow you to be more confident when speaking to your appraiser, as well as make sure you’re getting the short end of the stick. If an appraiser gives you an amount that is much less than what the home is worth, it could be a bargaining tool for you to lower the purchase price. It could also serve as a sign that you’re paying too much for your current home. This can be essential information when deciding on such a large purchase. Hopefully, this blog has been helpful and giving you a better understanding of appraisals. There is a ton of information that goes into appraisals, and it can be overwhelming at times. With that said, if you would like to learn more about appraisals or have any questions visit Sunbelt Appraisals today. Sunbelt Appraisals is one of the top Orlando Appraisers on the fha roster.
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