Real Estate Appraisals
An appraisal is one of the most critical aspects of getting a mortgage. It helps in giving the lender an estimated value of the property. It is essentially a professional estimate of the total value of the property you propose to buy and this is generally its market value. All properties are different and their location becomes one of the most important determining factors in their valuation.
A comparative market analysis (CMA) should not be confused with an appraisal. A CMA is used by real estate agents to help a home seller determine a very realistic asking price. The CMA’s drawn by highly-experienced real estate agents tend to be very close to the appraisal price. But the report that an appraiser gives is very detailed in comparison. Apart from this, lenders will only consider a report that has been made by an appraiser
Why is a Valuation Necessary?
Since there is no market-based pricing mechanism for trading property assets, an expert and professional evaluation is required to be done. If Market Value is the parameter on which the appraisal has been based, then it also has to be based on factors like the Highest & Best Use of that property. Most homeowners incorrectly assume that the value of their property is determined only after the appraiser completes a physical inspection of the property.
The truth is that the appraiser has a fair idea about the value of the property even before they actually inspect it. Various economic factors impact the way the housing market behaves and this is not always only related to the ebb and tide of home prices. And so, appraisers always follow a set of standard guidelines & best practices while determining property values. Take a look at a few interesting facts:
Neighborhood Comp vs. an Actual Appraisal
Many homeowners wonder why there is such as huge gap between the appraised value of their property, compared to other homes that are being sold on the same street. This difference exists because of the actual purpose of the valuations & the people who are creating them.
Valuation of a Property that Is Not Yet Built
It is definitely much simpler to understand how an existing property is valuated. But when it comes to valuation of new construction projects, there are some distinct challenges. In most instances, if an appraisal is required on a property that has not yet been built, the contractor & the home buyer will have to furnish additional information to get an accurate estimate of the value of the property. For more information on how appraisals work, contact Mortgages Done Right Inc.