Property Appraisal: Purpose and Process

Are you buying a home soon? Or looking to refinance your mortgage? If you've answered yes to either of these questions, the term "property appraisal" has probably popped up. Like most first-timers, you must’ve wondered what it means and how it is involved in your home buying or refinancing process.

Here we’ll discuss the concept, its importance, and the process to appraise your property.

Key Takeaways

What is Property Appraisal?

To start things off, let's first define what property appraisal is. Basically, it is determining the market value of your property unbiased. A property appraisal is performed by a certified professional known as an appraiser. They conduct a thorough inspection of the property in question. This helps them evaluate its condition, location, size, and other factors that affect its value.

It's important in real estate because it helps determine a fair selling price for the property. It is also an essential step in mortgage approval for those looking to buy homes.

The Purpose of Property Appraisal

You may be wondering why a property appraisal is so important. Here are 3 reasons:

1. Securing a Mortgage

   Once you apply for a mortgage, your lender will need a property appraisal. This appraised value will determine the maximum amount the lender will loan you. This ensures that the lender will not lend more money than the property is worth.

2. Protecting the Buyer

   Property appraisal can protect the buyer by preventing them from overpaying for a property. In case the appraisal value is lower than the agreed purchase price, the buyer can either renegotiate or walk away if necessary.

3. Determining Property Taxes

   Local governments use property appraisals to set property tax amounts. So, if your property's appraised value is high, you’ll pay more tax and vice-versa.

The Property Appraisal Process

Now that you understand why property appraisal is necessary, let's delve into the appraisal process.

1. Hiring an Appraiser

   This is the very first step in the process. Typically, it’s the mortgage lender who hires a licensed appraiser. Remember, the appraiser is there to appraise the property unbiased. They should have no connection with either of the parties.

2. Property Inspection

   Following that, the appraiser will conduct an inspection of the property. Throughout this examination, the appraiser will assess the property's general state and make observations of any noteworthy characteristics that may influence its value. Such aspects encompass the property's dimensions, room count, construction quality, roof condition, landscaping, and any supplementary amenities such as a pool or garage.

3. Comparing Similar Properties

   After inspecting the property, the appraiser uses the "sales comparison approach" like a detective looking for similar homes recently sold nearby. By doing this, they discover the existing market value of the property!

4. Final Appraisal Report

   After collecting and analyzing all the required data, the appraiser will create a final appraisal report. This report offers a comprehensive explanation of the methods used to determine the property's value.

5. Review by the Lender

   Finally, the lender will review the appraisal report. If the appraised value matches or exceeds the purchase price, the mortgage process usually proceeds smoothly. Yet, if the appraised value falls below the purchase price, it may challenge the transaction, requiring a potential renegotiation.

How to Prepare for a Property Appraisal

The property appraisal process might seem intimidating, but don't worry! You can easily take steps to prepare your property for appraisal:

• Make Necessary Repairs

  Just fix any noticeable issues around the property. Like broken faucets, chipped paint, or broken tiles.

• Enhance Curb Appeal

  The exterior of your home is the first thing the appraiser will see. Ensure your lawn is neatly mowed, plants are trimmed, and the exterior of your house is tidy and well-presented.

• Compile a List of Improvements

  If you've made significant improvements to your property, make a list and share it with the appraiser. This could positively impact the final appraised value.

FAQs

1. What is property appraisal, and why is it important in real estate?

It is the process of determining the market value of a property by an appraiser. It is essential because it helps set a reasonable price for the property, secures a mortgage, and determines property taxes.

2. Who hires the appraiser during the property appraisal process?

Typically, the mortgage lender hires a licensed appraiser to conduct an unbiased property appraisal.

3. How does property appraisal protect the buyer?

It protects the buyer by ensuring they don't overpay for the property. If the appraised value is lower than the agreed purchase price, the buyer can either renegotiate or choose not to proceed.

4. What factors does the appraiser consider during the property inspection?

During the property inspection, the appraiser assesses several factors, such as the property's condition, size, location, construction quality, roofing, landscaping, and any extra features like pools or garages.

5. How can I prepare for a property appraisal as a homeowner?

To prepare for a property appraisal, homeowners can make necessary repairs, enhance curb appeal, and compile a list of significant improvements made to the property, which could positively influence the final appraised value.

In Conclusion

Property appraisal might seem like just another step in the often complex journey of buying or selling a home. But remember, it's a vital part of the whole process. Knowing how it works can help you be well-prepared and might even affect your decisions about your property in a more personal way.

However, if you wish to check home values in your area that have been sold in the last few months, visit HAR.com. Click on home values, enter your area, and select the recently sold option. In just a few steps, you will see all the listings of properties that have been sold or are in the process.