Appraisals: Five Common Questions Answered

WHAT IS AN APPRAISAL?

A real estate appraisal is required on a property whenever it’s financed, whether you are buying or refinancing a home. (With a few exceptions, contact me for more information). It is done after an offer is made on a home, or during a refinance.  An appraisal costs several hundred dollars, and generally the borrower pays this fee.

CAN MY REALTOR OR LENDER GUARANTEE AN APPRAISED VALUE?  Appraising is an art, not a science.  Appraisers have opinions and although the opinion is based upon fact (sold homes in the last 6 months known as "comparables"), the analysis and conclusions about the property's value is based on his or her observations/educated opinions.  So, the answer is: no, there is no guarantee.

WHY DOES MY LENDER NEED AN APPRAISAL? The appraisal is the evaluation of the collateral in the loan process.  As a lender we need to be sure that the value of the home exceeds the amount of money we are lending so that if we do have to foreclose we are able to get our money back with minimal losses.  The appraisal primarily protects the lender's interests, but it is also protecting you from paying too much for what the market will currently support.  

I'VE HAD AN APPRAISAL DONE IN THE PAST, CAN'T I JUST USE IT (vs. paying for another one)?  One of the biggest borrower misconceptions is in thinking that because they bought their house for “x” or that it appraised for “x” in the past, the value should be the same now.  An appraisal is a “current” valuation based upon actual sales that have occurred in the past 6 months.  Also, many people mistakenly think that different styles of houses should be the same value or place a higher value on upgrades ($ for $) than what the market is willing to pay for. The market trends affect a properties value, regardless of what the house appraised for in the past. 

SHOULD I CALL AN APPRAISER TO GET THE VALUE OF MY HOME BEFORE I PUT IT ON THE MARKET OR REFINANCE? No, because once you have a contract on your house, the buyer's lender will order their own appraisal.  In essence, you are "wasting" your money.  Instead, contact an experienced realtor to give you an idea on where your house sits in relation to the current market.  Or, we offer a 'Sold Home Alert' to our clients, which allows them to check what comparable homes have sold for in their neighborhood.  It is very specific and easy to navigate.  

If you have additional questions, please don't hesitate to contact me!

Sincerely,

Chris Scheer

Your Residential Lending Team