What Have You Done For Me Lately? ~ Your House Appraisal

Ready to buy or sell a home?  Then it is time to evaluate the home’s response (as well as the surrounding neighborhood’s response) to the age-old question, What have you done for me lately? 

Appraisals are a key component of the home buying and selling process because they establish the market value of a property, which can vary by the general condition, size, location, amenities, etc. of one home in comparison to similar properties in the area.

Appraisals may sound strikingly similar to other home buying and selling processes, such as the Home Inspection and the Comparative Market Analysis. While the three share some of the same tools of analysis, each is different and serves a separate purpose.   When a home is sold, the buyer’s mortgage lender will order an appraisal of the ‘subject’ property. This is done to make sure the home is worth the amount being mortgaged (the principal amount owed to the bank).

Home inspectors are far more thorough than home appraisers in regards to the condition of the home. Home inspectors test and inspect every aspect of a home, its structure, its wiring and safety features. A home appraiser might note glaring disrepair, but is more concerned  with the size and appearance of the property. An appraisal is not a replacement for a home inspection and makes no guarantees to the condition of the home.

What’s That Mean for the Seller?
If the resulting appraised value is higher than expected, sellers may feel they have shortchanged themselves; however, with an accepted Purchase and Sales Agreement, there is little that can be done to break the contract to net a higher profit. In this case, prevention is the only cure. Sellers may opt to have a property appraised themselves before marketing. The appraisal will not be accepted by lenders and will increase cost to sellers, but an accurate report can help prevent problems later on. Note, however, that there will likely be some difference in reports between appraisers.

Low appraisals can be forewarned with a pre-market appraisal, but are not necessarily deal-breakers after the fact. Work methodically through negotiations to reach a solution. Sellers have the option of reducing the sale price; improving the property or escrowing a portion of the sale profits may also be an option.

What’s That Mean for the Buyer?
Buyers should have preliminary loan approval before the appraisal, but final commitment will not come until the property value is confirmed.

Low appraisals might result in loan denial or concessions with the seller. In addition to the seller lowering the purchase price, the buyer may choose to put more cash down on the property. The solution may be met halfway between the buyer’s deposit and the seller’s reduced price.

Notations made by the appraiser, regardless of whether the appraisal is high or low, may result in the lender requiring further documentation. For example, long life on the market may require explanation, or shared property access may require signed agreements.

Residential real estate appraisals are a necessary part of transacting real estate where property loans are involved.  Appraisals need not be a source of stress to buyers and sellers that have researched a property’s worth.  When unexpected hurdles do arise, a systematic, solution-oriented approach on the part of both parties will ensure completion of the sale. A good understanding of the function of appraisals can help to eliminate appraisal complications before they become an issue.

Have more questions?  Email places2love@gmail.com or call 404.444.5777 - we’d love to help!

Source: http://buyowner.com/learning/What_You_Need_To_Know_About_Home_Inspection.html