One of the most important aspects of buying, selling, or refinancing a mortgage is real estate appraisal. An appraisal is integral for everyone involved in the real estate process. In this article, let’s go through, in more detail, what a real estate appraisal is and how this benefits real estate buyers, sellers and professions.
Home appraisal 101
In simple words, an appraisal is a professional unbiased opinion of a home’s value. This is often used during mortgages during the buying, selling, or refinancing of a property. In the case of buy-and-sell, an appraisal is used to check whether the contract price of a home is suitable. From its location, condition, and amenities. For refinancing, appraisals act as a way to assure the lender that is not lending the borrower more than its actual value. When used for collateral. This is a way for a bank to protect itself from lending more than it can retrieve in a worst-case scenario.
How are real estate appraisal values determined?
The lender is the one who will usually ask for an appraisal in order to protect their interests. Appraisal will then be done by the qualified appraiser. Appraisers are expected to be familiar with the local area. They have no direct interest in the transaction according to legislation. Appraisers must then perform a full visual inspection of both the exterior and interior of the property. In this inspection, the property’s current condition is taken note of as this will determine if the property needs further repairs or maintenance.
The real estate appraisal value is determined by the market trends as well as the recent sales of similar properties. Other key factors that can affect an appraisal are: the property’s amenities, the number of bedrooms and bathrooms, the floor plan’s functionality, and the overall square footage.
What makes a low home appraisal? The location would be the biggest determining factor especially if the home is in an undesirable neighborhood. Nothing can be done with the actual location. However, owners can still do something to help keep its value. Some things that property owners can do is to spruce up the area surrounding the property, keep the house clean and tidy by being proactive with maintenance, and doing the necessary repairs to keep the appraisal from being lowered.
Appraisals for buyers
For home buyers, the appraisal is a key step in the closing process. When the appraisal comes in or above the contract price, then the transaction proceeds as planned. When the opposite happens and it comes below the contract price, the transaction is delayed or even derailed. Remember that the buyer has the advantage in the negotiation as a low appraisal can act as a negotiating tool to get the seller to lower the price. Banks would not lend any buyer more than what the property is worth based on the appraisal.
Appraisals for sellers and refinancers
If the appraisal is lower than what is expected, presenting a factual case to the appraiser to get the property to have a higher value is possible. This can help prompt appraisers to revise the initial appraisal. However, if the low appraisal is accurate, then that means sellers might have to lower the price of the property for it to get sold. It is not good to wait for a buyer who will pay in cash and would not require an appraisal for the transaction.
For those refinancing a property, a low appraisal can prevent this from happening. The value of the appraisal should be above or equal to the intended refinanced amount for the bank to approve.
What is next after the appraisal?
Once the appraisal is conducted by the qualified appraiser, the next step would be the mortgage underwriting. An underwriter will review the loan file to check. The list of things should be in order, and all documents are submitted. The risk of the loan would be assessed. Then it would be the basis for approving or denying the loan from all things considered.
A real estate appraisal is important no matter the nature of the property transaction. Work with an experienced real estate services firm that conducts real estate appraisal valuation. Santos Knight Frank offers a wide array of real estate services in one roof from brokerage, consultancy, research, property management, and valuation. Learn more about appraisal valuation and other real estate services from the experts by visiting the official website of Santos Knight Frank at https://santosknightfrank.com/.