Today, we’re going to be covering a subject that is important to any real estate transaction: appraisals.
First of all, what is an appraisal? Well, an appraisal is a value placed on a property by a licensed appraiser. This is different than a market analysis done by a real estate agent.
Appraisals are much more in depth, and are based upon the values of similar properties within a certain, tight geographic area.
This value is adjusted even further according to several factors. Things like square footage, the size of the lot, the age of the property, and the number of bedrooms and bathrooms are all important to the appraisal.
Even in the past few years, the appraisal process has changed quite a bit. Previously, real estate agents had the ability to choose who appraised the property.
However, regulations now typically require a third-party appraisal company to be hired by the lender. This is to make sure that there is no unnecessary pressure put on the appraiser.
So what exactly does the appraisal do? Well, outside of simply determining value, it can also impact the transaction. If the appraisal is lower than the amount offered by the buyer and accepted by the seller, the buyer may not be able to borrow as much as they may need for the mortgage.
This is why it’s so important that your Realtor’s market value is very thorough before you even order an appraisal.
The seller can also be affected. Even though a seller may price a property however they want, regardless of an appraisal, it would be difficult to find a cash buyer willing to pay any amount.
This isn’t often the case. In most cases, buyers need mortgages, and as I mentioned earlier, an appraisal must be of sufficient value to support the purchase price.
If an appraiser can’t justify a value, the seller will often have to reduce the value or the buyer will need to supplement the price with cash. Situations like these, if not handled correctly, can lead to a broken deal.
If you have any other questions or would like more information, feel free to give me a call or send me an email, I would be happy to help you!