An appraisal gives you and your lender an estimate of a home’s value. Lenders require an appraisal to make sure your offer, the purchase price, is in line with the home’s fair market value. To determine the value your home is compared to similar properties in the area that have recently sold. It’s important to understand that a home appraisal is NOT the same as a home inspection.
Where Does an Appraiser Get the Data Used to Estimate Values?
Gathering data is one of the primary activities of an appraiser. Data can be divided into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection
General data is gathered from a variety of places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To verify actual sales prices, we use tax records and other public documents.
Flood zone data is retrieved from FEMA data outlets, such as a la mode’s InterFlood product. And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other Real Estate in the same market area.
Bank Appraisal vs. Market Value?
In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
“The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”
Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Once Complete, Who Actually Owns the Appraisal Report?
For mortgage transactions, the lender requests the appraisal, either directly or through a third party. Even though it’s the buyer that eventually pays for the report, the lender is the intended user. The buyer is entitled to a copy of the report – it’s usually included with all the other closing documents – but is not allowed to use the report for any other purpose without permission from the lender.
It’s different when it’s the homeowner hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax appeal, for example.
Maximizing Your Home’s Value: Which Renovations are Worth the Investment?
This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren’t as attractive in a warm-weather climate. As a rule, the best ROI from renovating a home comes in the kitchen. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home – or about an 88% return on investment. Bathrooms were second, yielding 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.