An appraisal is typically carried out prior to any real estate transaction. It’s simply a way to determine what the property is really worth and if it fits with the mortgage loan being taken out.
A lot of factors are considered, including the following:
1. Similar sales.
The appraiser will look at similar homes in the area that have recently sold. If you own a three-bedroom, two-bathroom home and six others have sold for around $200,000 in the neighborhood, odds are good that your home will be roughly worth the same.
2. The location.
Where your home is located make a huge difference, as identical homes in very different neighborhoods could command vastly different prices. How desirable is the area? How good are the school? What is the demand like?
3. The home’s condition.
How well a home has been maintained plays a drastic role. If it’s been neglected and needs serious repairs — like a new roof — it’s going to come in well under the average. If the bathrooms and kitchen have been updated and it’s in great shape, it could come in over the average.
The key, some experts point out, is to focus on things that are physically attached to the home. Examples include built-in appliances, carpet, paint, siding, pipes, furnaces and much more. Many people frantically clean up the home before an appraisal. While there’s something to be said for presentation, the appraiser isn’t coming to see how cluttered a home is or how much he or she likes the furniture and decorations.
The appraisal sets the value of the house, so the impact on the potential sale — and whether or not the loan is approved — is significant. It’s important to know how this and the rest of the legal process will play out.
Source: Discover, “The Home Appraisal Process,” accessed Aug. 18, 2017