How Appraisals Work
September 10, 2022
Property appraisal is the process of creating an estimate of value for real estate. Fair market value (FMV) is the price a property would sell for given a reasonable amount of time and assumes the buyer and seller know about all the details of the property. For the appraiser to get an accurate value, they must collect appropriate data and apply one or more approaches. He or she will then explain the appraisal decision in a final reconciliation of value.
In most cases, the buyer pays for the appraiser. However, there are many lenders that like to “do deals” on fees. That could include paying for the appraisal or contributing towards the cost.
No lender wants to risk their money. It is essential to know that the home is worth what the seller is asking. That is what the appraisal is all about. Checking all work recently carried out in the home is an important part of the procedure. Did the owner pull permits? Has the work been approved, and permit closed? This means the appraiser may look at the same items as the home inspector.
The appraiser will go through the property for sale with a fine-tooth comb when conducting an appraisal. What an appraiser will check varies a little bit from state to state, but in general, you can rely on the appraiser to check the following:
Lenders are increasingly beginning to check for homes that have had upgrades to make them more environmentally friendly.
A home appraisal is part of most real estate transactions. Therefore both the buyer and seller should understand what an appraisal is and how it can impact their purchase or sale. When a buyer knows who pays for an appraisal, they are able to budget accordingly. And when a seller knows what an appraisal entails, they can prepare ahead of time for the actual appraisal.