What is a Real Estate Appraisal?
A real estate appraisal is a professional assessment of the value of a property. This assessment is typically conducted by a licensed appraiser, who will consider various factors to determine the property’s fair market value. Real estate appraisals are often used for a variety of purposes, including assessing the value of a property for sale or for setting the terms of a refinance.
What Are Real Estate Appraisals Used For
Real estate appraisals are typically used in a variety of situations, including:
- When a property is being sold, an appraisal may be conducted to determine the asking price for the property.
- When a property is being purchased, an appraisal may be conducted to determine the amount that the buyer should be willing to pay for the property.
- When a mortgage is being applied for, an appraisal may be required to determine the market value of the property for a lender.
- When a property is being refinanced, an appraisal may be conducted to determine the current value of the property to help set the terms of the new mortgage.
It is important to note that real estate appraisals are not the same as home inspections. An appraisal is generally required by a mortgage lender, while a home inspection is not. A home inspection is a comprehensive evaluation of the physical condition of a property, while a real estate appraisal is focused on determining the property’s value. The appraiser may call out certain items for repair if they determine that there are health and safety issues on the property being evaluated. But an appraiser does not thoroughly examine the property for repairs in the same way that a home inspector does.
What Happens During an Appraisal Inspection?
The process of a real estate appraisal begins with a licensed appraiser visiting the property to assess its condition and features. The appraiser will start by conducting a thorough walk-through of the property, including taking detailed notes and photos of the property.
The appraisal report will also measure the size and layout of the building, paying particular attention to any unique or distinguishing features that may impact the value of the property and the home’s condition. This may include the number of bedrooms and bathrooms, the size of the lot and square footage of the home, and the condition of the roof and other structural elements. They will do a quick look around for any potential health and safety issues in need of repair.
In addition to evaluating the physical characteristics of the property, the appraiser will also consider the location of the property and any nearby amenities or features that may affect how much the home is worth. This may include the proximity to schools, shopping centers, and transportation, as well as the local economy and housing market trends. In addition, the appraiser will do some research into the property’s zoning to make sure its current use is legal and permitted by the city or county. They may even call or visit the city planning office to acquire detailed permit information if necessary.
The appraiser will also look at recent sales of similar properties in the area to determine the current market value of the property. This involves comparing the features and selling prices of comparable properties to the property being appraised.
Once the appraiser has gathered all this information, they will use it to compile their final report and determine a fair market value for the property. This value will be based on the appraiser’s professional judgment and expertise and will take into account all relevant factors that may impact the value of the property.
It is important to note that the appraiser will not make any repairs or improvements to the property during the appraisal inspection. The appraiser’s job is simply to assess the value of the property as it currently stands. Although they will not perform any repairs or improvements during the visit, the appraiser may call out certain health and safety issues to be fixed before closing.
Purchase Appraisal vs. Refinance Appraisal
Home purchase appraisals and home refinance appraisals are both assessments of the value of a property that are conducted by a licensed and certified appraiser. However, there are some key differences between the two types of appraisals.
One of the main differences between home purchase appraisals and home refinance appraisals is the purpose for which they are conducted. Home purchase appraisals are typically conducted when a property is being bought or sold in order to determine the fair market value of the property. Home refinance appraisals, on the other hand, are conducted when a homeowner is seeking to refinance their mortgage in order to determine the current value of the property and set the terms of the new mortgage.
Appraisal Tips for Sellers (or Refinancers)
If you are selling or refinancing your home, you may be wondering what you can do to ensure that the appraisal goes smoothly and results in a fair market value for your property. Here are a few tips to keep in mind as you prepare for a home appraisal:
- Make sure the appraiser has access to your property: It is important that the appraiser has full and unrestricted access to your property in order to accurately assess its value. Make sure to clear any obstacles or clutter that may block the appraiser’s access to certain areas of the home.
- When selling your home, your listing agent will typically take care of scheduling the appraisal inspection and providing the appraiser with access. For refinances, scheduling the inspection falls on the homeowners.
- Gather any documentation that may be relevant to the appraisal: The appraiser may request certain documents or information in order to help them assess the value of your property. This may include things like permits for an addition or any information about unique features or amenities.
- Make any necessary repairs or improvements: If there are any issues with your property that could potentially lower its value, it is a good idea to address them before the appraisal. This could include things like fixing leaky faucets, painting chipped or peeling walls, or repairing damaged flooring.
- Be prepared to answer questions about the property: The appraiser may ask you questions about the property, such as when it was built, what upgrades or renovations have been made, and any other relevant details. It is important to be as forthcoming as possible in order to help the appraiser get a complete understanding of the property.
Appraisals At JVM Lending
At JVM Lending, we also provide the following list to agents or homeowners to help prepare for the appraisal inspection:
- Carbon Monoxide Detectors are installed on all levels of the property.*
- Smoke detectors are installed in each bedroom, in areas adjacent to the bedrooms, and on each floor.*
- The water heater is on and double-strapped down.*
- Electricity is turned on.
- The furnace is turned on and working.
- If you have gas – gas is turned on.
- If you have a pool – the pool is filled with clear water, and the equipment runs, or a safety fence blocks off the pool.
- If the house was built prior to 1978 – chipped paint in the interior should be scraped and reapplied.
- If the purchase involves FHA financing – chipped paint on the exterior should be scraped and reapplied.
*Carbon monoxide, smoke detector, and water heater requirements are dependent on your state. Please refer to state and local guidelines to determine the appropriate requirements in your area.
The above checklist is not comprehensive, but it should help you avoid some of the more common minor items an appraiser may call out for repair.
By following these tips, you can help ensure that the appraisal process goes smoothly and results in a fair market value for your property!