Why Real Estate Appraisal is Necessary
Real estate appraisal is the opinion regarding a value, generally market value, of a property. People use real estate appraisal when they are buying, selling, or investing in a home. This needs to be done to find the correct value of a property before big decisions regarding it are made.
Why is Real Estate Appraisal Important?
Appraising is especially important to investors. An appraiser is a third party that will come in and decide upon the value of a home. An appraiser will look at the interior and exterior of the home and other properties in the area and then they will proceed to determine how much the home is worth. Real estate appraisers should have gone to school or taken courses on determining home values.
Real estate appraisal is done for both the buyer and the seller's sake. This is because while the buyer does not want to overpay for a home, the seller does not want to sell the home for significantly less than it is worth. It is highly unadvisable to buy or sell a home before it has been appraised by a professional. If the property value is $100,000 and the asking price is more then proper negotiations have to be made. Appraisals are done so both parties can come to a fair agreement.
What Not to Do During Appraisals
A real estate appraiser should not be paid by the buyer or the seller. They are supposed to be a completely neutral and impartial party. If either party pays them then they may have a tendency to swing in that favor. Oftentimes, a lending company will require a real estate appraisal before they approve a loan. The value that the expert determines is what the bank or mortgage company will go by when they issue your loan.
How is Real Estate Appraisal Done?
Real estate appraisal can be done in a couple of different ways. The methods are the cost method, income method, and sales comparison method. The sales comparison method is used most often because it is considered the most accurate. The cost method involves the estimated costs of improvements in the property, deterioration factors, and the value of the land.
The income appraisal method is used for properties that will bring in an income. It is based upon the amount of money that the income property will produce. The sale comparison method compares the sale prices of similar properties that have been sold recently. This is the most popular method because in reality, a house is only going to be worth as much as someone will pay for it.
Real Estate Appraisal Protection
Real estate appraisal protects everyone involved in buying or selling a home. Without an appraisal, neither party would know the price of the property. Then, there would be tons of overpaying or underpaying going on. The appraisal price is the actual market value of a property.
