A real estate appraisal is an evaluation of a property for assessing its market value, thus helping a person estimate the amount he can pay while buying a property. Moreover, real estate appraisal is important to determine the property tax for which the owner is liable to pay and also for potential sales price, when owner wishes to sell the property.
A report from an appraiser is more detailed when compared to comparative market analysis (CMA) that determines the market value of the property by comparing it with similar properties in the same area. An appraiser is an independent third party who has knowledge about the real estate market. He generally is licensed by the state.
When and why you need real estate appraisal?
Following is the list of reasons for obtaining real estate appraisal:
An appraisal of the property is essential to get the correct price when selling your property. This service is performed by your real estate agent/appraiser. The agent first compares your property with other properties in the same area that were sold in past one or two years and that are similar to your property in terms of features, size and condition. The agent then adds or subtracts the value to your property based on the features found in comparables.
When planning to buy a home, a property appraisal is very important for getting the real and fair sense of what it actually is worth. In short, an appraisal of the property that you are willing to buy helps in verifying the amount you are agreeing to pay for the property is reasonable or not. Thus, appraisal is an essential condition in the purchase agreement which can either make or break the deal. Yet, property appraisal done once, you are on the way to close the deal successfully.
A lending institution requires a property appraisal when you are planning to refinance your home. If your home does not have enough appraisal value, then the chances of refinancing could scuttle. It is important to prepare your home before refinancing it so that the collateral value offered by the property is justifying the refinanced loan amount you seek.
Home equity Loan
When planning to get a home equity loan, appraisal of your property is again important; especially if the values of the properties in your area have increased. Equity on your home for which you will borrow money is determined based on the current property value. If your property’s value has decreased, then possibly your equity on home has also decreased in value.
Cash or business loan
If you are trying to seek other type of loan for which your property will be your primary source, then you necessarily need to have current valuation of the property to be done by a professional real estate agent/appraiser and put in writing. This written appraisal should be brought when discussing with lenders on the loan.
An appraisal is important for determining the property tax. If the value of your property has decreased, then you can get reappraisal for the same. This might lower your annual tax payment.
Thus with real estate appraisal, you will be able to assess the real value of your property and it is an important step in buying, selling or refinancing your property.