An appraisal is an estimate of real estate property made by an certified appraiser not involved in the real estate transaction.
The appraisal is usually part of a loan application and is needed in order to get approval from the lender on a mortgage loan.
Lenders need an appraisal for two basic reasons:
- Have a set idea of how much the borrower realistically needs.
- See if the property value is enough collateral for the loan amount.
To help better understand the value of your property houselocator.com offers an appraisal center that offers online appraisal services.
With online appraising buyers and sellers can conveniently verify the value of their property and estimate a realistic market value.
Online appraisal centers rely on available data from sales reports, tax records, loan information and other public records to estimate the value of your property.
Although online appraising is the closest, most reliable method to a conventional uniform appraisal report; banks and lenders do not consider online appraisals for approval of any loan type. Conventional appraisals used for loan satisfaction are much more detailed, extensive and comply with the Uniform Standards of Professional Appraisal Practice (USPAP).
Lenders first hire an appraiser to examine the physical characteristics of the property and determine the value based upon three basic approaches.
- Cost Approach to value is what it would cost to replace or reproduce the improvements or defects within the property.
- Income approach to value is of primary importance. This approach provides an objective estimate of what an investor would pay based upon the net income the property produces.
- Comparison Approach is an estimate made upon comparison of other similar properties in the area, also known as “comparables”.
The inspection itself, depending upon size and uniqueness of the property takes between fifteen to thirty minutes. During this process the appraiser takes many things into consideration when evaluating your property. The appraiser usually first measures the exterior to determine square footage, this initial measurement is pretty standard among the appraising industry. The appraiser will then take notes on interior features such as room layout, number of bedrooms, baths, etc. The appraiser will then make judgments of the general condition, appeal and layout of your home. After the initial inspection the appraiser then examines the neighborhood or area to find similar properties that have sold within the last year. During this process it would be important to inform the appraiser of any physical damage or leakage that isn’t evident.
Generally speaking the value of your home is usually learned through a CMA (Comparative Market Analysis). Through a CMA, whether you are buying or selling, would be a more efficient way to see if a home or property is over and under priced. Do not confuse a CMA with an appraisal. Appraisal reports are much more extensive and detailed and is the only report a bank will consider when deciding whether or not to lend money. Here are some evaluations you will see on an appraisal report
- Details about the subject property, along with side-by-side comparisons of three similar properties.
- Overall real estate market in the area.
- Statements about issues the appraiser feels are harmful to the property's value, such as poor access to the property.
- Notations about flawed physical characteristics, such as a crumbling foundation.
- Average sales time for the property.
Appraising a Real Estate Property is not a science nor math, so the value of your home that the appraiser estimates is not the final value of your home or property.