For most people, if they have done anything in the wide world of real estate, have most likely heard about appraisals. It doesn’t matter if you are buying a home, selling a home, or just checking out the market, you are going to come across this concept. It is one that has great bearing on the real estate market, one that can literally change the outcome of almost any real estate deal. You may find yourself in a situation where an appraisal will come back and do good by you, but then you will also find times when the appraisal can completely alter your plans.
Appraisals, what are they?
When you hear the word appraisal in any industry outside of real estate, you usually think that something’s value is being assessed. Well, in real estate, it is the same. A real estate appraisal is simply when a piece of property, a home, a piece of land, or anything else for that matter, has its value assessed and its current fair market price is determined. Remember, that is the current fair market price. It may be higher or lower than the price it was originally sold for. This price changes over the months and years due to the quality of the property, the quality of the neighborhood or surrounding area, and so on and so forth.
What kinds of appraisals are there?
There are two different kinds of appraisals: formal and informal. The formal appraisal is done by a licensed and trained appraiser. They know how to accurately assess a property’s value and it is considered legitimate by most people. These appraisers are usually hired by a potential homebuyer to go through a home or around the property to make sure that the seller’s asking price is accurate and that they aren’t paying too much for it.
Next, there is the informal. These are done by your real estate agent. They have some good training on appraisals so they can help a seller to more accurately set a price for their property. These are usually fairly accurate and are considered the legitimate price for the property until a formal and official appraisal can be made.
Why homebuyers need an appraisal?
An appraisal can save a homebuyer money
One of the biggest reasons you want to have an appraisal done is so that you can know the true current market price for the piece of property. This saves the homebuyer money because they can, if the appraisal comes back and the home is worth less than what the buyer was asking, you can renegotiate the sale price. However, this doesn’t always go the other way. If you are planning on buying a home, get an official appraisal done, and find that it is worth more than the asking price, you don’t have to renegotiate the sales price—this is because you are the one that is paying the appraiser and they don’t have to disclose what they find to anyone but you.
An appraisal puts your mind at ease
This is an extension of what we just talked about. When a homebuyer gets an appraisal done, it means they know for a fact that the asking price is fair or unfair. There is no guessing or wondering if they made the right decision. Whether they are paying too much for the property or not.
An appraisal validates value
Now, this may sound funny, but hear us out. When you buy a home, you want to make sure that it is worth it to buy. Never mind the asking price, the question that should come first is, does this property have value, or is it a massive liability? If the home is really worth investing in, an appraisal will be able to tell you. You don’t want to buy a home or a piece of property just to find out that it has depreciating in value and has simply been costing you money until now.
An appraisal is sometimes required by lenders
Lenders put their neck out every time they lend money. Because of this, they want to make sure they are making wise financial decisions. One tool that helps them to analyze a purchase is an official appraisal of value. This lets them know that they won’t be helping you buy something that will cost both them and you more money in the long run.
An appraisal helps set price
Like we talked about earlier, an unofficial appraisal can be a great way to more accurately price a piece of real estate. Without it, a seller is simply guessing and has no idea what it is actually worth. This will help them to 1) get out of the property what it is worth and 2) sell the property quicker.
Other times appraisals may be necessary
Buying and selling a home aren’t the only times that someone needs to consider an appraisal. In fact, there are quite a few instances that would necessitate an official appraisal.
Appraisals may be necessary when opening a home equity line of credit.
This kind of line of credit is a special one. It can be pretty complex, but, at its core, you are using your home as collateral for a line of credit. Since your home is at the center of this line of credit, the lender will want to know exactly how much the home is worth.
Appraisals may be necessary when refinancing a mortgage
Refinancing a mortgage can be just as complex as getting one in the first place. And, just like with the first mortgage, the lender will want an official appraisal.
Home appraisals are a complex and important part of real estate. Be sure to call an agent over here at the Hughes Group for more information on home appraisals, how to get them done, and for more information on why they are important. These agents have the expertise to answer any of your questions. And, if you are from out of town and want to learn more about Boise in general, they can help get you acclimated in no time.