Role of a Real Estate Appraisal

A real estate appraisal is a monetary evaluation of your real estate property. You can either use it for determining a suitable market value for your home or the price at which you should sell it. An appraisal can be both formal and informal depending on whether it has been performed by a professional company or real estate agent.

In order to determine an appraisal value for your home, an appraiser would analyze the interior and exterior of your house, focusing on improvements which can be made and upgradations that have become a necessity. The appraiser would also observe the sales trends for other house in your area and in similar localities for a comparison. The results of this extensive study are then combined into a single factor in the form of your appraisal value, which is then used in several situations.

Though there are many scenarios in which appraisals are important, their role is most evident when it comes to mortgage loans, refinancing and buying or selling your house.

Whether you are thinking about refinancing your current loan or whether you want to avail a new mortgage plan, the appraisal value of your real estate has a key role to play in terms of approval from the lender. If your home appraisal value is low, it would just imply that your market value is not that high, and you will probably not be able to refinance a loan in such a situation. Similarly, if the home for which you are interested in acquiring ownership of does not have an impressive appraisal value, you will have a hard time in finding a lender who would approve your mortgage.

Selling Real Estate

If you are interested in selling your home, you will need the appraisal value to determine a listing price for your home. Contact a real estate agent and he would be able to do it for you. He would observe the price of other properties in your area that are similar to your house and were sold off in the last one or two years. Following this, the agent would account for other factors into the value, and come up with a suitable price. As an example, while a fence can increase your home value, leaking pipes will just bring it down.

Buying Real Estate

When you offer a price on a property and show your interest in buying it, you will have to have it professionally appraised. This would ensure your chosen lender that your selected property is worth investing and would favor him in the long run, provided he loans you the amount.  Moreover, this would also let your verify that your agreed upon price for the property is fairly reasonable. As such, there are many buyers that mention a contingency clause in the agreement stating that the sales is contingent only when a loan is approved which is further dependent on the appraisal value.

Refinancing the Loan

Appraisals have to be performed again when you apply for a mortgage refinance. The purpose remains the same which is to insure that the property is worth an investment.