An appraisal is a valuation which gives an opinion about the property’s value at a given time. An impartial appraiser is authorized to give an opinion on the value of this appraisal. This protects both the buyers’ and lenders’ interests.
Lenders want to ensure that the collateral is adequate to cover the loan. Buyers will not pay more for a house than it is worth.
What if you’re the seller? Do you need an appraisal before you list your house? To help answer the question, let’s look at three possible problems that an appraisal could solve.
Armchair Experts
Zillow is one of many real estate websites. Trulia. Redfin. Redfin gives buyers greater access to information than ever. Although this is a huge advantage for buyers, it also has its drawbacks.
Many buyers consider themselves “armchair experts” and can estimate the value of your house and come up with their own prices. An appraisal is sometimes a good idea to justify your price.
Unique Property
Sometimes there’s not enough information to help you find the perfect home. High-end homes with spectacular views and amenities are more popular, especially for higher prices. If your property is unique, buyers and agents may not be able to pull the right comps.
Even if the agent has accurately priced the property, a third-party impartial appraiser may be of assistance.
The Red Flag Scenario
Buyers must obtain an appraisal before applying for a loan. The bank will only accept the appraised value. The bank will accept 20% down payment if a buyer is looking to buy a $1,000,000 house.
The buyer hopes the home will be appraised for $1,000,000. The bank will loan the buyer 80% ($800,000.) They will also need to make a downpayment of $200,000. If the appraised value is less than $900,000., the bank will only loan the buyer 80%.
The down payment of $200,000 must be paid by the buyer. They also have to pay $80,000 out of their own pockets. This is not a surprise.
Sellers often believe the buyer will be able to pay a higher down payment.
It doesn’t really matter what the appraisal is.
A low appraisal could cause financial problems for the buyer, even if they are still able to afford the house. Buyers should be cautious if an appraiser gives a lower price.
Buyers don’t want to pay more for their homes than they need. A home appraisal can help to avoid any unpleasant surprises.
Are appraisals right for you?
An appraisal could be beneficial for any of the three situations mentioned. An appraisal is not appropriate for all situations. Each home is unique and should be appraised before being put on the market.
Your agent will help you determine the best strategy. It doesn’t matter how far you are in the process, it is vital to discuss an appraisal if your goal is to sell a unique property.
One example: A home we purchased was more expensive than other homes because it had been completely renovated.
It looked aged from the outside, but the interior was as stunning as it could be. Although there were many buyers interested, it was hard to justify the cost.
We were able to share the appraisal with buyers after we had received it. They felt more confident in closing the deal and paying the seller’s asking prices.
We also recently signed a deal for $1,350,000. The buyer’s appraisal came in at $1300,000. The appraisal was valued at $1300,000. We reviewed it and found that some adjustments had not been made. The property was renovated with almost $400,000
The seller paid $1.370,000. For a second appraisal, the seller paid $1,370,000. With the appraisal in hand, the buyer was able pay $1,350,000 This is the lesson. This is the lesson.