Before you sell your home or property, you should consider getting it appraised to discover the real market value of your home. This is the only thing that will ensure you get a fair price for the buyer.
Even if a bank has already appraised your home, it`s still a good idea and beneficial to commission your own appraisal.
An appraisal is also known as an inspection of your home, which results in providing you with the fair market value of your home`s worth. In order for lenders to verify your property as collateral for a loan application, they’d require a real estate appraisal to be done for their underwriting or risk assessment. You may also need re-insurance, depending on your property equity.
If you’re a new first-time buyer you may also want to request your own, even if you lender issues one. This is especially true if:
● Your planning your financial assets
● Planning for retirement
● Planning on selling your home privately
● Planning on selling your home as part of a divorce or separation settlement
Ordering or requesting your own appraisal make you the client, making the appraiser responsible to you and not the lender. This can help you to determine, what you should be asking for your home, if you’re overpaying in property tax, if you’re better to rent or sell or how to increase your home’s value through home improvements.
Your appraisal will include details such as:
● Economic life
● Condition of the property in detail
● Other recommended inspections
● Other details about the utility of the property
Although costs tend to vary, a home appraisal typically starts at around $250. This cost can increase if the property has less available comparable or restricted data. These costs are minimal compared to your investment costs.
If your lender issues an appraisal, they will not share the appraised value of your home with you. If you have a large down payment and good credit score, the appraiser might simply do a drive-by to examine the outside of your property. This will happen nearly 80 percent of the time.
Now if this appraisal ends up being less than what you agreed to pay, you won’t have any help in a this difficult situation. Since real estate appraisers uses the same information and principals as realtors when determining market value, you can always consult with your realtor as they can provide you with comparable market analysis. This will provide you with a fair market range that you’d deem acceptable.
Should you decide to get your home appraised you’d do so during the condition period of the buying process, unless you prefer to find out the market value before you make an offer. In this case, you’d want to consult an independent appraiser during your home search, or simply include a ‘subject to an appraisal’ clause in your purchase offer.
If the appraisal comes back and it’s less than the listing price, this can help you or your agent to negotiate with the seller or seller’s agent.
There are three approaches an appraisers can take when determine the value of your home:
- The direct comparison approach: Compares your home to similar sold or for sale properties, and also those that have expired. Your home value is then estimated based on these comparisons.
- The cost approach: An estimate of the cost to replace or reproduce your property. Depreciation of external obsolescence, functional and physical components are applied.
- The income approach: An estimate of possible income from the home (i.e. a rental unit). Capitalization rates, gross income multipliers are then factored in.
Speak to a highly experienced real estate professional to learn more about appraisals and the home buying process.