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Real Estate Appraisal
A real estate appraisal can be a very valuable document for your home. The reason for obtaining an appraisal will vary but in general, you would need a real estate appraisal to help lower your property taxes, for estate planning, if in probate, for a divorce settlement, to secure a home improvement or consolidation loan, and so on.

The most common reason for a real estate appraisal is for homebuyers to validate the home’s value with the asking price. In fact, for lenders to secure a mortgage loan, most are mandated by Federal and State laws as well as banking regulations to obtain an appraisal. A new law went into effect back on January 1, 1993, stipulating that mortgage loans coming from federally insured lenders or any other type of federal transaction must have an appraisal performed by a licensed Professional Engineer or a certified appraiser.

An appraisal is needed to protect buyers, sellers, and lenders. For instance, if you found the perfect home for sale and that home was priced at $200,000, you need validation that the value of the home is actually $200,000 or more. Just imagine what would happen if you purchased the home only to discover the value was $150,000. Not only would you as the buyer be upset, but also the lenders would be losing money left and right.

When you are ready to buy a home, part of the responsibility to ensure the appraisal will be accurate for the home is yours. Many sellers know the power of presentation. You might walk through a home and fall in love with it because the homeowner has it beautifully decorated to coordinate with his or her furnishings. Swept up in the beauty of the décor, you fail to look beyond the furniture, light fixtures, window treatments, and so on.

Be sure when looking at homes to buy that the owner’s décor has no influence on you. After all, you could set your heart on the house and find yourself in a bidding war, determined to get the contract no matter what. You pay more than the asking price to outbid the other potential buyers and you get the house for $150,000, $5,000 more than listed. Now the appraiser comes through and finds the home is only worth $142,000. Worst yet, after the owner is gone, somehow your contemporary furnishings do nothing for the Mediterranean architecture of the home. While this may sound like good old-fashioned common sense, you would be surprised at how many people find themselves in this position.

If you are working with a real estate agent, be sure a special clause is added to your offer staying, “This contract is contingent upon the property’s value matching the appraisal.” This type of clause protects you in case there is unbalance between worth and the appraisal value.

Remember that the value of a home is based on recent sales of similar homes in areas. A good appraiser will use market comparisons that only include homes of the same square footage, condition, room count such as bedrooms and bathrooms, and amenities like swimming pool, spa, solar paneling, fencing, fireplaces, etc. The appraiser will conduct all the research and then fill in a form so accurate comparisons can be done. Additionally, to come up with a true value, the appraiser is required to use no fewer than three verified closed sales that include photographs.

If you are the seller, you can do specific things to boost the value:
  • Keep both interior and exterior in excellent condition
  • Own a home in a good school district
  • Ensure home additions blend well with the home’s natural architectural structure
  • Own a home in a neighborhood where all homes are well maintained
  • When buying, avoid buying the largest home in the residential area
  • Do not over improve the home so it is overvalued for the area
The number one factor for a strong appraisal value of a home is LOCATION! While you can paint a home, add beautiful landscaping, put in a swimming pool, and make other updates, you cannot change the location. Therefore, when shopping for a home, make sure you do your homework. Just a few things to avoid:
  • Homes under airport flight path
  • Too close to nightclubs or bars
  • In a rundown area
  • Close to apartments or commercial property
  • Near factories or plants that omit unpleasant odors
 
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