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What You Need To Know About An Appraisal

An appraisal is a review and estimate of a property’s fair market value. An appraisal in conducted by a state-licensed professional, an “appraiser”, who has specific training and education to evaluate a property and provide a value for a property based on its physical condition, amenities, and location.

Appraisals are typically required by mortgage brokers or mortgage lenders prior to providing a home or property loan to ensure they are not issuing a mortgage loan for more than the property is worth.

An appraisal may also be requested by a homeowner to:

  • Dispute rising property taxes
  • Determine a home value during a divorce or estate settlement
  • Help determine an accurate selling price or to negotiate during a sale
  • Show proof of replacement/repair costs for homeowner’s insurance
  • Required by a government agency
  • Dispute an eminent domain case or during another lawsuit

Can Another Mortgage Company be Used After the Completed Appraisal?

In most cases, yes. Although the borrower (the potential buyer of the property) pays for the appraisal, the mortgage company actually “owns” the appraisal and is listed on the report. Most lenders will transfer the appraisal to the new lender, but some may charge a fee to complete the transfer—this is called an “Appraisal Retype Fee”. If the original lender you were working with denies the transfer, then, unfortunately, you would have to pay for another appraisal under the new lender’s name.

Who Determines The Market Value Of A Property?

The seller of a home or property is responsible for setting the price—not the appraiser. Typically, the listed price may be determined with the help of a real estate agent. Real estate agents conduct a Comparative Market Analysis (CMA) to determine the average cost for a home of your size, on a lot of your size, in the condition, and in the location of your home. Sellers typically do not order an appraisal so as not to be bound by the appraisal when listing their asking price and can ask for more than what their real estate or CMA recommends.

However, since most mortgage companies will not provide a loan for more than the property’s appraised value, a borrower/buyer can use an appraisal to negotiate the price of the home.

How Can I Assist The Appraiser?

Appraisals can be conducted for several reasons. Below are some points to consider if your home is being appraised that could help to influence the appraised value by pointing out important aspects of your home. You should provide the appraiser with the following information, where applicable.

  • The purpose of the appraisal.
  • If you are selling the home, what price do you have it listed at, and if you are selling through a realtor (and who)?
  • If you are purchasing the home, the agreed sale price, and the type of mortgage you will be using.
  • Additional property or appliances that are included with the property.
  • For investment properties, disclose the income that the property generates and the expenses it requires for upkeep.
  • Supplying a copy of the rental agreement or a copy of the deed, purchase agreement, property survey, or other property-related documentation may also be helpful.
  • Any easements that are a part of the property and ownership of right-of-way or agreements pertaining to the easement.

Real estate tax bill, annual property taxes, utility access, and other amenities of the property.

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