What
You Must Know About Home Appraisals
Understanding how appraisals work
will help you achieve a quick and profitable refinance or sale.
1.
An appraisal isn’t an exact science
When appraisers evaluate a home’s
value, they’re giving their best opinion based on how the home’s features stack
up against those of similar homes recently sold nearby. One appraiser may
factor in a recent sale, but another may consider that sale too long ago, or
the home too different, or too far away to be a fair comparison. The result can
be differences in the values two separate appraisers set for your home.
2.
Appraisals have different purposes
An appraisal being used to figure
out how much to insure your home for or to determine your property taxes may
rely on other factors and arrive at different values. For example, though an
appraisal for a home loan evaluates today’s market value, an appraisal for
insurance purposes calculates what it would cost to rebuild your home at
today’s building material and labor rates, which can result in two different
numbers.
Appraisals are also different from CMAs, or competitive market analyses. In a
CMA, a real estate agent relies on market expertise to estimate how much your
home will sell for in a specific time period. The price your home will sell for
in 30 days may be different than the price your home will sell for in 120 days.
Because real estate agents don’t follow the rules appraisers do, there can be
variations between CMAs and appraisals on the same home.
3.
An appraisal is a snapshot
Home prices shift, and appraised
values will shift with those market changes. Your home may be appraised at
$150,000 today, but in two months when you refinance or list it for sale, the
appraised value could be lower or higher depending on how your market has
performed.
4.
Appraisals don’t factor in your personal issues
You may have a reason you must sell
immediately, such as a job loss or transfer, which can affect the amount of
money you’ll accept to complete the transaction in your time frame. An
appraisal doesn’t consider those personal factors.
5.
You can ask for a second opinion
If your home appraisal comes back at
a value you believe is too low, you can request that a second appraisal be
performed by a different appraiser. You, or potential buyers, if they’ve
requested the appraisal, will have to pay for the second appraisal. But it may
be worth it to keep the sale from collapsing from a faulty appraisal. On the
other hand, the appraisal may be accurate, and it may be a sign that you need
to adjust your pricing or the size of the loan you’re refinancing.
More
from HouseLogic
How to use an appraisal to eliminate
private mortgage insurance
Understanding the assessed value of your home for tax purposes
Understanding the amount at which to insure your home
Other
web resources
More information on appraisals
How to improve the appraised value of your home
G.M. Filisko is an attorney and award-winning writer who’s had more than 10
appraisals performed on her properties in the past 20 years. A frequent
contributor to many national publications including Bankrate.com, REALTOR®
Magazine, and the American Bar Association Journal, she specializes in real
estate, business, personal finance, and legal topics.
