A home appraisal can have a major impact on a home’s ability to sell. The process of selling a home involves several moving parts. It’s best to think of a home appraisal as an educated guess.
The reason why appraisals are so important is because almost all financial institutions won’t lend money for a home that hasn’t been appraised.
Lenders need to know what sort of risk they’re dealing with, and without an appraisal, they have no way of knowing what a home is truly worth. There are eight things that everyone should know about home appraisals.
Understanding Neighborhood Comps
Home buyers have the option of trusting the seller’s word and believing a home is worth what the seller says it is worth, but for most people, this isn’t the best idea. To get the best results, it’s a good idea to use a local appraiser because the valuation is likely to be much more accurate.
An Appraisal Is Fair Market Value
When a home is appraised, it’s assigned a fair market value. The reality is that most home sales do not occur without an appraisal. The definition of appraisal is an unbiased opinion of a home’s value from a professional. Some appraisals are even used for home refinancing.
How Appraisal Value Is Determined
Many homeowners think features are what determine the value of their home. However, most appraisals are significantly influenced by the price similar homes in the area sold for. The amenities, bathrooms, bedrooms and other factors also play into the valuation.
The Role of the Lender in Appraisals
A lender is obligated to make sure a homeowner isn’t borrowing more money than a home is worth because lender must be able to recoup their money if the home goes into foreclosure. The appraisal is performed to prevent the lender from loaning more money than a home is worth.
Appraisals and Cash Buyers
A situation involving an all-cash buyer is the only situation where an appraisal won’t impact the value of the home. The problem is that most homeowners don’t want to wait for an all-cash buyer, so the appraisal opens up a much larger pool of potential buyers.
Changing an Appraisal
It’s not uncommon for sellers to feel their home wasn’t appraised correctly. Distressed property sales that have occurred nearby can cause a good home to be appraised for less than it’s really worth. The problem is that it can be difficult to challenge low appraisals because of federal guidelines.
Examine the Appraisal and Reevaluations
Although it can be difficult, it’s possible to get a reevaluation of a home. Homeowners have the right to get a copy of the appraisal report, and they can also challenge the report and ask for a reevaluation.
Why Low Appraisals Occur
There are several causes of low appraisal values. A common reason for a low appraisal consists of an appraiser having to use comps from nearby neighborhoods because there are no comps for the local area. In many cases, something as simple as what a home overlooks can dramatically affect the price. These are eight things that all homeowners should know about home appraisals and how they work.