Anytime you buy a home or any kind of a property or refinance one, you will be required by the lender to have an appraisal. This is done by an independent appraiser whose expertise is to determine the current value of your property. As a property owner you should be aware of some aspects of appraising.
The most common time an appraisal is done is when a home is being purchased. The appraiser will be informed of the sale price of the home and his or her goal will be to substantiate that price. The appraiser will do many things to evaluate the property; the most important thing that an appraiser will look at is the comparable sales of other similar properties that have sold in the last few months in the immediate area. The appraiser will assess the square footage of living space, condition, upgrades, amenities, lot size and many other factors compared to other homes. The appraiser will want to compare “apples to apples” in properties and not bananas and peaches. It is easier for an appraiser to compare and appraise condos because they are typically more “cookie cutter” and have similar characteristics. But whether a condo or a single detached home is being purchased or refinanced, an appraisal will be required.
Another common reason for an appraisal is when you refinance your property. All lenders will require an appraisal so they know the value of the property before they will refinance it. Because property values have dropped over the last several years, today, appraisers are very conservative with regard to value. Five years ago, appraisers were very liberal and thought nothing of giving very high values to properties because prices kept rising and appraisers felt safe putting a higher value on a property. So today, a buyer does not have to worry about overpaying for a property because it will have to appraise at a fair market value. In fact, this can be used to a buyer’s advantage when the buyer is in a multiple offer situation on a property and needs to increase the amount of their offer. Providing the buyer is qualified, he or she should not be afraid to increase their offer price. This might be the trick to get the property you want when you are competing with other buyers.
Appraisals are also done sometimes by individual property owners, not when they are buying or refinancing a property but because they simply want to know the value of their property. But if you do this you need to be aware that the appraiser does not have a specific amount or value to substantiate, like when someone is buying a home. So the appraisal may not reflect the true value of a property. So please keep this in mind if you are ever hiring an appraiser to do an appraisal for you just for your general knowledge.
Also keep in mind that when you are doing an appraisal for a home purchase or a refinance, you are responsible for paying the appraiser. A typical home appraisal can be around $450 or more depending on the size of the home. Once you get into income and commercial property appraisals, they tend to be a lot more expensive.
Until we meet again, enjoy life and your home.
Trent St. Louis is a licensed Real Estate Agent and a member of the National, California and San Diego Association of Realtors. You can reach Trent at SpecialAgentTrent@gmail.com or at his office in Hillcrest, 619-300-1621. The Metropolitan Group (CADRE#01273643).
If the home appraisal is close to where it needs to be, but not quite there, homeowners have a some options to improve home value quickly. They can get a solar lease (solar panels added to the home) in states like California and New Jersey for no upfront costs and free installation. This has been studied and shown to improve the value of the home by 3.6%. (ucla, national bureau of economic research). An example of this is http://www.qualifywithsolar.com. Also, appraisals are all over the map these days! I’ve seen one appraiser come in at 460k and another come in at 430k within weeks of each other. How can there be so much discrepancy?