Facts About Real Estate Appraisal

An informative real estate appraisal helps determine the value of property on the market. When you ask to use a real estate property for a loan, your real estate agent will ask for an appraisal of the property.

It is important not to confuse appraisals with CMAs. CMAs are something that agents use to help people selling homes determine a good asking price. An experienced real estate agent may come close to the price of an appraisal, but still they are not the same thing or to be confused with one another.

An appraiser gives a much more detailed report, and it is the only report that a bank will look at when considering you for a loan approval.

Each individual state licenses their appraisers after they complete an internship and course hours. During their internship they become familiar with their particular housing and property market. Lenders sometimes hire appraisers for their staff or they will contract an appraiser to do an appraisal for them. It is important that the appraiser is a subjective third party who has nothing personally to do with the transaction.

The property that they will appraise is called the subject property, and you usually pay for the appraisal when you apply for your loan.

What is seen on report

These are very detailed reports, but here are a few things you can expect to see:

1. An overall evaluation of real estate in the area
2. Complete details about the subject property and 3 comparisons of other properties
3. There will be notations about any serious flaws on the property or home
4. The type of area the home is located in
5. The average sales time of the property (an estimation)

There are two usual methods utilized to appraise a home or property.

Sales Comparison

Makes an appraisal by comparing the subject property to other properties that are similar and have sold in the area. These properties are usually known as comparable. Since no two are ever alike, the appraiser will compare the subject property to the comparable. He or she may even have to make adjustments to the comps (comparable) to make them more in line with the subject property.

Cost Approach

This approach is very useful when it comes to properties that are brand new or just being built. The appraiser then estimates how much it would cost to replace the old property.

It is important to note that if your property appraises lower than the sales price, your loan may be declined. The lender will carefully study the real estate appraisal report given by the appraiser and make a decision about your loan request according to the findings.