Have you ever wondered how appraised value impacts the real estate market and the homebuying process? Whether you’re buying, selling, or refinancing a home, understanding the concept of appraised value is crucial. It plays a significant role in determining the worth of a property and affects various aspects of real estate transactions.
What is Appraised Value?
Let’s start with the basics. Appraised value refers to the estimated worth of a property determined by a professional appraiser. This value represents the appraiser’s unbiased opinion based on an evaluation of various factors such as location, size, condition, comparable sales, and market trends. Appraisals are typically conducted when buying/selling your home or refinancing a home to ensure fair pricing and secure mortgage loans.
How is Appraised Value Determined?
The appraisal process involves several steps. First, an appraiser visits the property to assess its physical attributes, including square footage, number of rooms, condition, and any unique features. They also consider the location and proximity to amenities, schools, and transportation.
Next, the appraiser researches recent sale histories of similar properties, known as comparable sales or comps, in the neighborhood or surrounding area. These comps should be as similar as possible to the subject property in terms of size, condition, and location. By comparing the subject property to these recent sales, the appraiser can estimate its value.
Additionally, the appraiser analyzes market trends, such as supply and demand, any home improvements that have been made on the property, interest rates, and economic conditions, which may influence property values. This thorough evaluation ensures that the appraised value reflects the current home buying market conditions accurately.
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September 22, 2023
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Why Does Appraised Value Matter?
Appraised value holds significant importance in the home buying process for several reasons:
- Determining Fair Market Value: The appraised value helps establish a fair and objective sale price for a property. Buyers can ensure they are paying a reasonable amount, while sellers can set an appropriate listing price.
- Securing Mortgage Loans: Mortgage lenders use the appraised value to determine the loan-to-value ratio. If the appraised value falls short of the purchase price or loan amount, it may affect the buyer’s ability to secure financing to purchase the home.
- Negotiating Power: Appraised value can influence negotiations between buyers and sellers. If the appraisal comes in lower than the agreed-upon price, buyers may have leverage to negotiate a new starting point at a lower purchase price with your real estate agent.
- Protection for Buyers: Appraisals provide an extra layer of protection for buyers, ensuring they don’t overpay for a property. By obtaining an appraisal, buyers gain confidence that the property is priced appropriately.
How Often Should A Property Be Appraised?
Property appraisals are typically conducted when buying or refinancing a home. However, the need for a new appraisal may arise in certain circumstances, such as when appealing property taxes or during estate settlements.
Can You Choose Your Appraiser?
Appraisals are ordered by the lender, which has two options for choosing appraisers and managing quality control. Lenders may either outsource to third-party appraisal management companies, or they may have their own internal appraisal desk to handle appraisal coordination. Either way, to ensure independence, federal regulations require a layer of separation between the appraiser and anyone with a financial interest in the transaction.
How Long Is An Appraisal Valid?
Appraisals are generally considered valid for a specific period, usually around 120 to 180 days. After this time, a new appraisal may be required to account for any changes in market conditions.
Can I Challenge The Appraisal Value of A Home?
If you believe the appraised value is inaccurate, you may have the option to challenge it. This typically involves providing additional information or evidence to support your claim. Keep in mind that challenging an appraisal can be a complex process.
Does The Home Appraisal Value Equal The Market Value?
While appraised value and market value share similarities, they are not always the same. Appraised value represents an appraiser’s professional opinion, whereas market value is the price a buyer is willing to pay and a seller is willing to accept for a property in an open market.
Contact JVM Lending For Appraisal Expertise
Understanding the concept of appraised value is essential for anyone involved in real estate transactions. By comprehending how appraisals are determined and the significance of appraised value, you can make informed decisions, negotiate effectively, and protect your interests.
Remember, appraised value serves as a guide for fair pricing, helps secure mortgage loans, and provides an additional layer of protection for buyers. It’s a valuable tool that ensures transparency and objectivity in the dynamic real estate market.
If you have any questions or concerns about appraised value or need expert advice regarding home appraisals, don’t hesitate to reach out to JVM Lending. Our team of appraisal experts is ready to assist you and provide the guidance you need to navigate the intricacies of real estate transactions successfully.