Having an appraisal is an important part of the home buying process, bringing tremendous leverage when it comes to price negotiations. A real estate appraisal establishes the likely sales price a property would bring if offered in a competitive real estate market.
What Are Appraisals?
Appraisals are detailed reports based on an appraiser’s on-site evaluation of a property, as well as an evaluation of sales data. They include details about the property, along with side-by-side comparisons of similar properties. You can also find an evaluation of the local real estate market, statements about issues to be aware of, notes about flawed characteristics, an estimate of the average sales time for the property, and the type of area in which the home is located.
Two types of appraisals
A Sales Comparison Approach and a Cost Approach are two common appraisal methods. A Sales Comparison Approach is an estimate of the property’s market value by comparing it to similar properties that have recently been sold in the area. The Cost Approach is most useful for new properties where the cost to build the property is known. With the Cost Approach the appraiser estimates how much it would cost to replace the property if it were destroyed.
A homebuyer’s initial mortgage approval is accomplished early on, but final approval of the loan depends on a satisfactory appraisal. An appraisal is the only evaluation report a lender considers when deciding whether to lend money, as it provides assurance that the property will sell for at least the amount of money being loaned. If the property’s appraisal is lower than the sales price, the loan may not be approved. In some cases, the buyer pays for the appraisal fee at the time of the loan, while in other cases the fee is added to the settlement and paid at the closing.
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As the The Intentional Realtor, my goal is to help you achieve the reality of homeownership. I’ll do my best to make sure that you receive the best representation possible when it comes to buying a home and that you receive an appraisal well worth the fair market value, which is why securing a good Realtor is in your best interest to help you find the home of your dreams.