When you are planning to sell your home or is considering on getting a loan, one of the things you need to do is to have your property appraised. Appraisals determine the value of your home according to several factors that are usually set by a uniform guideline, depending on the property’s location.
The appraisal value of your home can be determined by having an inspection done by a professional on the date that was scheduled by both parties. Because appraisal reports are a requirement when applying for a certain loan or can be used as an effective reference when you are planning to sell, appraisals are very treated seriously as they can be the deciding factor of how much money you will get for your loan and how much you could get if ever you sell your house.
How many times should you have your home appraised?
When you are having your home appraisal done due to personal reasons such as selling it, you can be the one to order the appraisal report, and will be the individual to decide how often you will get it done. Depending on where you live and your location’s current condition in the market, experts recommend homeowners to order appraisals more than once, as the value can change every now and then.
If you are still not planning to sell your property but are planning to do so in the future, you may want to have your home appraised periodically. The validity of an appraisal report is usually around four months, and this may change according to your local municipality.
Professionals working in the real estate industry recommend owners to have their homes appraised every one or two years if they are not in a rush to sell. This is because the state of the market in your area can abruptly change and may increase or decrease its prices in just a couple of months due to several reasons. When you have the luxury to wait, this can give you a boost in the money you will get when you sell at a time when the market is doing great.
In the case where you are not planning to sell your home in the nearest future but just want to know how much your property is worth, it may be sufficient to have your home appraised every three years.
The frequency of having your home appraised will not be up to you, however, if the reason you are ordering your appraisal is due to a loan. When you are in the process of a loan or mortgage, the lender will be the one to order the appraisal, not you, and the result will determine if your loan is approved and how much amount you will get. As mentioned above, the validity of an appraisal report is usually only around four months, and if you need to get an appraisal done after the four-month period is done, you should pay for another inspection.
Who does a home appraisal? And who pays for it?
Home appraisals are done by professionals called “appraisers.” Their job is to visit your property, conduct an inspection, and use materials and information from your home and other similar properties to determine its value. There are certain requirements that are needed before one can work as an appraiser, and in some states, they may be required to take and pass an exam to get their license.
There are many reasons why an appraisal is ordered. As what was mentioned above, appraisals are ordered mainly due to three reasons: during a loan, when selling a property, and another reason is when buying a property. Depending on the situation, the one who will pay the fee will change due to various reasons.
Situation Number One: A homeowner wants to apply for a loan
One of the main reasons why a home appraisal is ordered is when the property owner is currently applying for a loan in a lending company or is planning to take a loan from their bank.
What is currently happening: In the case where the homeowner is applying for a loan, one of the requirements that are needed or are requested by the bank or the private company is the copy of an authentic appraisal report of the specific property. This is needed as it serves as the proof of the worth of your home, which would also be the factor if your loan will be approved or not.
If you are planning to make your home the collateral which is the case for mortgages, the appraisal report will be the guarantee for the bank so that they can be sure that your property is really worth the price that will be released to you in your loan in case it was approved.
Why this is necessary: From a bank or a lender’s point of view, loaning money to homeowners can be a very risky process. If there is no proof of the property’s worth in legal documents, it can result in a huge loss when the property is foreclosed and then discovered to be worth less than what was declared to be its value.
Who orders the appraisal? In this situation, the one who will order the appraisal is the bank or private lending company. Although the lenders are the ones who ordered the appraisal, this does not mean that the appraiser will be biased. Appraisers are third-party professionals, which would mean that they will not take the side of the lender or the person who is getting a loan or mortgage. All they will do is inspect the property and arrive at a certain valuated estimate that will not favor any party.
Who will pay for the appraisal? Even though the lenders are the ones who ordered the appraisal, the property owner is usually the one who will pay for it. Also, because the lenders ordered the appraisal, they will be the ones to decide if you will be given a copy of the report or not, which is why you need to ask them if you will be provided with the result before having the appraisal done.
There is an option of hiring an independent appraiser, which are professionals recognized by the state and are also licensed that can be hired without the request from a bank or lender, however, this can be expensive and useless as most banks would want to get the appraisal report from the appraiser they have contacted to be able to guarantee its accuracy. Hiring an independent appraiser is mainly just for the property owner’s peace of mind, or if they want to have a second opinion after the result of their initial appraisal.
Situation Number Two: A homeowner wants to sell their property
Another reason why an appraisal report is ordered is when a property owner wants to sell or is planning to sell their property.
What is currently happening: In the event where a property owner would want to put their property for sale in the market, they may want to have an appraisal report in their hands. Though this is not required by most states, an appraisal report can be an effective tool for the seller when they are already in the process of selling their property or are already negotiating with a potential buyer.
Why this is necessary: There are three reasons why it is recommended to have a home appraised.
First, appraisal reports will benefit the seller by avoiding the risk of selling their property at a very low price. Though this can be surprising, there are in fact a lot of cases where sellers are not able to get their property’s worth due to inaccurate pricing, and this is sadly very common in the United States. When a property is properly appraised, the owners will at least have an estimate of how much their house is worth, so that they will not be forced to settle in accepting a very low offer.
Second, appraisal reports will be an advantage for the seller for them to sell their property fast, especially when they are in a rush to do so. Though it may be tough to admit, there are many property owners who are guilty of pushing the price of their properties at a much higher rate than what it is really worth, possibly due to adding sentimental value. Some may be unaware of this, as owners can, of course, be biased in pricing their house, or they may just not be knowledgeable on how a property is assessed. When a house is priced too steeply, it will discourage most buyers and it will be very hard to sell the property.
Finally, the third reason why it would be wise to order an appraisal report is that it gives the owners the chance to sell their property at the best price possible for the market which can be done after the appraisal is already complete. The report will contain significant information that can help the owner determine how they can raise the current appraisal value of their property. For example, they may get some renovations done or have an unfinished basement completed so that the next time they will order an appraisal, the value will be a lot more than what was initially set.
Who orders the appraisal? The homeowner will be the one to order the appraisal, although there are some cases where their real estate agent will do it for them. There are also some real estate companies who offer appraisals when you get their services.
Who will pay for the appraisal? When ordered in an independent appraisal, the property owner will be the one to pay the fees.
Situation Number Three: A potential buyer wants to know the property’s value
Lastly, one of the situations why an appraisal value is ordered is when a potential buyer wants to know how much the property they are currently eyeing is worth.
What is currently happening: In the case where a property is currently placed on the market, potential buyers would want a guarantee that the house is actually worth the price that it was posted on the list. Nobody would want to be taken advantage of, especially when buying something that is very expensive. This is why there are buyers who order appraisal services, especially when they are serious about buying the property.
Why this is necessary: An appraisal value does not only give an advantage to the seller of the property but also gives a benefit to the potential buyer of the house. You would not want to pay for a house that sells for a million dollars, but is only actually half the price’s worth, wouldn’t you? It is only fair for a buyer to request for another appraisal by an independent appraiser, even though the seller already had their home appraised. This minimizes the risk of being scammed by sellers that are selling their house at a very expensive rate.
Who orders the appraisal? The potential buyer will be the one to order the appraisal if they want to. As mentioned above, it will be the buyer’s decision if they would want to order a separate appraisal, or if they would follow the appraisal report that the seller has if they have one. There are also some instances where there is no need to order an appraisal report for both parties – the buyer and the seller – as long as the transaction will be less than the amount set by the government.
Who will pay for the appraisal? The potential buyer will be the one to pay the appraisal fees.
What are the things you should know before having your home appraised?
Before having your home appraised, no matter for what reasons, it is important to know the following:
- Appraisals are not an exact science.
One of the important things you should know (and keep in mind) before having your home appraised is that appraisals are not considered an exact science, but instead an art. This means that it is possible for three appraisers to go into your home, inspect your house, and arrive at three entirely different results.
Of course, professional appraisers have a basis on how they arrived at a certain estimate, and they will often use the Uniform Residential Report Form by Fannie Mae, which is considered the standard form utilized to determine the valuation of a certain residential property.
- It is possible to check the credentials of your appraiser.
Appraisers are professional workers that are licensed and certified to be able to get a job in a certain city or state. Depending on the location they are currently doing their practice, they will have to abide by the rules that are stated by their local municipality. Some states are stricter when it comes to their appraisers, and may even require them to undergo training or to pass an exam before they can do their work. As what was mentioned above, appraisers are unbiased, because they are a third-party enterprise.
However, there may be some instances where property owners would want to make sure that the appraiser assigned to them has the necessary skills in order for them to arrive at an accurate appraisal report. This can be done by visiting the website of the National Registry of Appraisers. When you are in the process of ordering an appraisal, check the appraiser’s credentials by inputting their license number and other details. After all, this information is open to the public so that they can guarantee that the appraiser who will do the job has the license to operate in their city. You would not want to hire an appraiser that does not know the importance of having retaining walls in places with frequent rains and their value if they are licensed to operate in the sunny areas in the United States.
- The appraisal value of your property does not mean that it would sell for that price.
When you already received the appraisal report of your property and it turns out that your property is worth $400,000, it would mean that when you sell your house, it will sell for $400,000 right? Wrong.
The appraisal value of your property does not mean that it will be equivalent to the price that your house will sell. As said before, an appraisal value is just an estimate, meaning, if your home is valued to be around $400,000, it may sell less than that amount. However, this can also mean that your house may sell more than what it is worth according to the appraisal report. As with other things when it comes to selling, if a buyer is willing to pay more than the amount that was appraised, there is nothing that can stop the seller from getting the amount.
Although this does not happen often, a real estate agent may arrive at a different estimated valuation and sell your property at a higher price than you initially expected. Of course, this is not always the case, and you should never require them to sell your home at a steep price just because you want to.
- The appraisal value of your property will change.
There are many factors that can determine what the value of your home is, such as the number of rooms, bathrooms, if there is a pool, and so much more. Appraisers have their list on the information and details of not only your property but also on the other properties around your area. Also, they will also compare other properties that are similar to yours in order for them to arrive at a specific valuation on their report.
You should never expect the price of your home to remain in the value that was appraised many years ago. For example, when your home was appraised for $400,000 last 2010, chances are high that it will have a different value in 2021. This is because of many reasons, and one of them is the change in the market. When the current market is too saturated or too hot, you will receive an appraisal value that is too different from what you should normally get, which is why you need to think twice before selling when the market is not doing great.
What are the things you need to prepare before a home appraisal?
Planning to sell your property? Need to use your home as collateral? If this is the case, you may have already scheduled a home appraisal. As a property owner, the goal is usually to have a higher appraisal value for your house, as this would mean that you will be able to get a higher amount for your loan or mortgage.
To increase the chance of higher appraisals, you can do the following before your appraiser visits:
Do a proper cleanup of your property.
One of the most important things you need to do before scheduling an appraisal is to do a proper cleanup of your property’s interior and exterior. As with other things, nobody would want to buy a dirty and messy home. If you do not have the time to clean, check for a company that offers cleaning services near you. Some cleaning companies even specialize in sprucing up a home for an appraisal, as they also recognize how crucial it is to have a house cleaned before having an appraiser visit.
Do make your house a home.
According to real estate experts, appraisers visualize how a family would want to live in the property they are inspecting, which means that this can also be an important factor that will determine what your home’s value will be. If possible, put some decorations in your home, rearrange the pillows, and make it as cozy as you can.
Do reschedule other appointments.
There is no set time for how long an appraisal would last. The bigger and more complex your property is, the longer it would take for the appraiser to do their inspection. Some appraisals can take a couple of hours, and some may require days to finish. Obviously, you would not want to rush the appraisers to complete the job just because you have an appointment. When you schedule an appraisal and would want to accompany the appraiser in case they have any questions, make sure to clear your calendar so that there will not be any issues and headaches in the entirety of the procedure.
We are happy to hear from you. Contact us for any of your appraisal needs. From residential to commercial, divorce to estate tax and trust, we do it all.
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Fort Wayne, IN 46803