What is Real Estate Appraisal?
The document that provides the estimate of a property’s fair market value is known as appraisal. The appraisal states the market value of the property. The one that performs the appraisal is called an “appraiser”. The appraiser is usually a state-licensed person that is trained to utilize existing information to come up with a home valuation. During the appraisal, there are various considerations that are being checked in the property. These considerations are the location, amenities, and the current market values of similar properties.
Why get a home appraisal?
One really important step in purchasing a house or refinancing a house is the appraisal process. Most creditors will not approve a loan application if the property doesn’t have an appraisal. There are various reasons why appraisal is necessary. These reasons are listed below.
– To know the property value before selling it.
– To contest high property taxes
– To finalize and settle a divorce
– To settle an estate
– To use as a negotiation tool when selling
– To determine replacement cost for insurance purposes
– To protect your rights in an eminent domain case
– To refinance
What are Home Appraisal Methods?
When establishing a value of a property, appraisers utilize three common approaches:
– Sales Comparison Approach: This approach takes into consideration the similar properties, which have been recently sold near the area. Its ideal to compare it to the properties which are within a ½ mile radius of the subject property, and have sold within the last 180 days. These are the properties, which are similar in terms of size, number of rooms and layout. The appraiser compares the subject property to the sold properties. The factors taken into consideration are the square footage, number of bedrooms, number of bathrooms, property age, lot size, view and the property condition. The sales comparison approach is used in appraising residential or home properties.
– Cost Approach: The coast approach takes the value of the landed, plus the cost of reconstruction, less the accrued depreciation compared to a new building. This formula is used for income or commercial properties.
– Income Approach: To get the property value, the potential net income of the property is capitalized. This approach is suitable for income producing properties at the same time utilized together with other valuation methods. Capitalization is the process of converting a future income stream to a current value. The income approach is usually done for commercial properties.
After a thorough analysis of the property based on these three approaches, a final estimated value is given based on the data. When appraising a single-family owner-occupied properties, appraisers prefer the sales comparison approach the most.
Who owns the Appraisal?
Though the home appraisal is paid for by the borrower, the mortgage company is the primary owner. This is usually frustrating for borrowers because when they decide not to work with the mortgage company, they may not get a copy of the appraisal.
The appraisal works like this: the mortgage company orders the appraisal on the behalf of the borrower. When this is done, the appraiser puts the name of the mortgage company on the home appraisal papers. Though the borrower does have the right to receive a copy of the property’s appraisal, it is still at the discretion of the mortgage company if they’ll give the original appraisal to the borrower.
Can I use another mortgage company even after the home appraisal has been completed?
Yes this is possible. However, if you change mortgage company, it is not assured that you won’t have to get another appraisal. However, in most cases, you will not have to pay for another appraisal should you change your mortgage company.