In the world of real estate investing, one of the primary knowledge real estate investors need to nourish themselves with is the concept of house appraisal. As a real estate investor, it is vital to understand a real estate property’s value to be aware of the financial benefits and risks when investing in one.
House appraisal and the concept thereof is essential not only for the one who purchases the property but also for the lender and seller.
Here is an in-depth discussion on what you need to know about property appraisals.
What Is House Appraisal Or Property Appraising?
Estimating the property value within the market is the overall context of appraisals using the official criteria. A great example of such would be how an appraisal can save the buyer from paying $400,000 for a house worth only $280,000. It’s because the house was appraised over time. Meanwhile, as a seller, house appraisals would occur when you were living in the said property. The overall value and net worth have adapted to the current market conditions and can now be sold for a higher price.
One of the downsides that house appraisals bring is that a property can lose its value after selling. When the criteria were not followed, the property was sold at an unreasonable price compared to its market value. Even instances wherein the seller opts to sell their property abruptly rather than waiting for the appraisal to kick in, losing more than what they could have gathered from the property.
House Appraisal Vs. House Inspection
One of the misconceptions we have about house appraisals is that it has the same limitations as house inspections. This is entirely wrong! A house appraisal may seem like an inspection resulting from knowing your property’s current net worth or what it could be over time. We want to guarantee that you aren’t going to confuse yourself with the concept, and Real Estate IQ, the number 1 in deal finding, has taken the liberty of enlightening you on the matter.
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- Appraisals are concerned and focused on the value of the house.
- Appraisers focus on the tiniest detail to calculate the best and appropriate value.
- Inspectors focus on details to measure current conditions for repairs.
- Inspections are also maximized to review a purchase further.
- House appraisers will focus on the permanent parts of the house (square footage, location, lot size, etc.),
- On the other hand, House inspectors would take the décor, furniture, and the little details into consideration.
Appraisals Can’t Be Done Just By Anyone.
The appraisal must be done by an appraiser who is familiar with the local area. It’s because they would know how to calculate the market value in comparison to neighboring properties. They would also be familiar with the rates that appraisals can go over time since they have been observant of the trend over the years.
Appraisers usually go through various training and take a handful of tests to prove their credibility in the field. That means they would know what they are talking about and that the value calculated on their end would be following extensive research and analysis.
Just like any other profession, learning is within the limit of the learner. Appraisers push themselves beyond their limits for them to do their job at a level of professionalism. You can’t have anyone appraise your property because the results would be a loss in investment. Knowing the actual value will provide you, as a real estate investor, the leniency to make the right decision in investing.
As a real estate investor, you must also consider that appraisers aren’t perfect. Getting a second opinion or a pool of appraisers won’t do you any harm. Take that extra mile and go for it.
A Professional Appraiser Can File The Appropriate Report
When appraising single-family properties, appraisers will usually conduct their appraisals using the residential appraisal report. The Fannie Mae Uniform Residential Appraisal Report is considered and accepted as the standard form for appraisers because it offers uniformity.
Uniformity, in a sense, would pertain to the idea that all properties observed and appraised with this form will be in line with the standards needed to calculate the net worth of a property. It can be done for new properties and those that have gained asset value.
Fannie Mae requires that all appraisers be certified to appraise similar properties within the same area. Using the said report, the appraisals must include the following:
- The entire exterior and internal assessment of the single-family house.
- A street map of the appraised property, alongside a list of comparable properties, appraised.
- The appraiser’s analysis of the said property. This must include conclusions about the value of the property based on the observations he/she made.
Hiring The Best Appraiser
There are two ways of hiring an appraiser:
First, You must know if you would want to apply for a mortgage. The person or company planning to lease or lend you the money will hire an appraiser to determine the appraised property’s possible value.
One thing about these companies and lenders after your property is that they may not hire the best to do the job. They may have the credentials to do the task. However, they may have yet to hone the skills necessary to do the job well. Keep in mind that investing in appraisers may provide you a higher chance of getting your property worth. Do not be afraid to shell out for the benefit of your cause as a seller or a real estate investor.
Second, paying for your appraiser may seem like such a drag and a costly one at that. However, it must be considered that the goal is to sell your property at its appraised cost. If you wanted just to gain the quick buck, you shouldn’t have gone through the process of appraising.
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The Cost Of Hiring An Appraiser
House appraisals will usually cost around $300, maybe more or less. Depending on the value of the property being appraised. Another factor could be the local area you are in, and the appraiser tasked to do the job. It is favorable and advisable to do your estimate of similar sold properties in your area and showcase your findings to the appraiser to kickstart and assist him/her to come up with a more accurate appraisal.
Getting a bad assessment is not only a financial loss on your end as a seller or a real estate investor. The review may lead to a possible sale that could be made and may result in further liabilities, even worse, legal matters. Don’t be steep with the effort of having your property appraised, and appraised the right way.
The overall blog aims to provide you with a broadened perspective and understanding of what house appraisals are. House appraisal is a necessary process that real estate investors should familiarize themselves with and take advantage of.
Professional insights will always overcome personal opinions and even assumptions. An assumption with credible data can lead to false conclusions, leading to a loss rather than investment gain.
The real estate industry has a competitive market that capitalizes on how you sell your property. The return on investment is guaranteed if your value has been properly appraised. To guarantee that you value property appreciation, it symbolizes how you perceive yourself in both your personal and physical development. Property appraisal relies on the same sentiment therefore should be nurtured and thought of before taking any form of action.
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Excerpts: House appraisal is a necessary process that real estate investors should familiarize themselves with and take advantage of.
In the world of real estate investments, one of the basic knowledge real estate investors need to nourish themselves with is the concept of house appraisal.
Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.
Source: https://www.nytimes.com/2013/01/13/realestate/getting-started-assessing-the-value-of-a-home.html
