Lenders require appraisals as part of the loan application process. The appraised value lets a lender know whether a property is worth the dollar amount of the mortgage loan for which a borrower applies. One problem related to the accuracy of home appraisals is that an inexperienced appraiser can undervalue a home, affecting real estate sales and refinance loans. This is reason enough to take the steps you need to get an accurate home appraisal.
Factors Affecting an Appraisal
There are several different factors that affect a home appraisal. The appraisal process involves the use of market analysis and mathematics. An appraiser's own experience and subjective opinion can influence the appraisal value as well. For example, several appraisers who appraise the same property can each come up with a different value. Skilled appraisers who know the local area may arrive at different values for the same property, however, the differences usually will not be that significant. Since real estate trends and valuations can vary widely, you are likely to get a more accurate appraisal if you look for an appraiser who knows the local housing market.
The fee you pay an appraiser can affect the quality of the appraisal. An experienced appraiser usually is unwilling to work for a low fee and prepare a report within a short turnaround time. Out-of-area appraisers willing to work for lower fees do not always have a lot of knowledge about local market trends outside their home markets. This can lead to a lower valuation. The problem is that some mortgage lenders will only pay low fees to appraisers. As a result, they don't get a quality appraisal.
Steps of an Appraisal
The steps of an appraisal affect a home's valuation. When the appraiser physically inspects your property, he will measure the total living area and note the location of the home. He will research similar properties in the same neighborhood that have sold recently. Standard practice is to compare properties that have closed recently, although an appraiser can also use properties pending sale and active listings in the comparison. In the case of active listings and pending sales, the asking price is used in the analysis in lieu of a closed sales price. Appraisers are allowed to go back as far as six months when performing a comparative market analysis.
Being there on-site during the appraisal can make a difference. You as the homeowner are the best person to answer an appraiser's questions. By being present, you make sure that the appraiser knows about any special provisions included in the sales contract. This can lead to a more favorable appraisal as the appraiser may include these items in the home's valuation. If you are there when the appraiser inspects your home, you can also point out unique advantages related to the property's location.
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