Thinking of purchasing a home? Chances are someone has told you to get an appraisal, but you may have no idea what that means. A home appraisalis actually an essential component of the home buying process if you are using a mortgage.
So, before buying a home, it’s best that you familiarize yourself with appraisals:
Home Appraisals Defined
According to Investopedia, a home appraisal is “an unbiased professional opinion of a home’s value” and is “almost always used in purchase and sale transactions.” The professional opinion comes from a third-party who evaluates the home’s value in terms of its features, location, and condition. Thereafter, they will assess whether or not the seller’s asking price accurately reflects the actual value of the home.
How Do Appraisers Determine a Home’s Value?
First, the professionally-trained appraiser will travel to the property and examine it. He or she will analyze the condition of the home – inside and out – looking for anything that may have an impact on the home’s worth. Additionally, appraisers will consider the other properties that have sold nearby recently to get a sense of the market value that has been set. Once they have gotten a good enough idea of this, they will compare the property to the nearby sold ones, seeing if the condition is up to par.
Overall Importance of Appraisals
When buying a home, appraisals are helpful because they allow you to feel confident that you are paying the right price. You don’t want to be spending more money on a home than you really should. Without them, we would not know whether the price of a home is an accurate representation of its true worth.
Moreover, they are vital to securing financing, since the maximum amount that a bank will lend you is equivalent to the true market value of the home. As a result, if an appraisal is lower than the asking price of a home, the bank might only give you a loan up to the appraised amount. If this occurs, you can try negotiating with the seller. It would seem only fair that he or she lowers the price to the appraised amount, but sometimes they can be stubborn about this. If all else fails, just turn down the deal.
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