Understanding The Appraisal Process
One of the most critical parts of getting a mortgage in Las Vegas is the Appraisal. An Appraisal is a professional estimate of the property’s value that you are planning to finance, and the primary purpose of an appraisal is to confirm the home value for the lender.
An appraisal is a professional opinion about what a property is worth based on a series of factors and common home valuation best practices.
Home appraisals do more than just determine the estimated value of a home for the purposes of the buyer or seller, an appraisal protects mortgage lenders from lending on an overvalued property.
Buyers and Appraisals
If the Buyer is securing a new loan to purchase your home, the Buyer’s lender will require an appraisal to determine the fair market value of the property. A licensed appraiser will research nearby houses (within one mile if possible) that have sold in the last six months and are similar to yours in size, age, construction and amenities.
The appraiser will make an appointment to see your home and will take about 30 minutes to an hour to look over the property. He will measure your home, draw a representative floor plan, take photographs inside and out, and review the property conditions, specific improvements and amenities. You can help the appraiser by providing a list of any improvements and remodeling projects completed since you bought your home along with an approximate dollar amount for each improvement. Keep in mind that remodeling projects rarely bring 100% return on investment, but a list will ensure the appraiser doesn’t overlook the added features.
The appraiser will provide a typed appraisal report to the Buyer’s lender within a few days after visiting your property. You will be notified if the lender requires repairs before they will lend on your home. If specified in the contract, you must repair these problems. The appraiser will have to return to review the required repairs, and a re- inspection fee will be charged.
First step of an appraisal would be inspection. The appraiser is required to inspect the property that is needed of an appraisal to be certain of its value. The features of the property inspected are; the number of bedrooms, bathrooms, location of the rooms, etc. this is to ensure that there are in fact rooms on the property according to the property owner.
In most cases there is a sketch of the property included in given detail of the square footage supported in the layout of the property.
In essential to the appraisal, there are also defects that an appraiser looks for as well, really determining the property’s value.
The easiest part to understand with an appraisal [incity] is the cost approach. With information on local building costs, such as how much the cost is for labor and other factors that would help in the determination of how much it would actually cost to rebuild such a property as the one being appraised.
The outcome of this value sets the maximum limit on what the property would go on the market for. This in fact helps the home buyer in whether or not it would cost less to build a property similar to it. However, the features of the property and location of it is not taken into consideration in this part of the appraisal process.
Sales Comparison Approach
To start on this approach, the appraiser will get to know the neighborhood’s surroundings, get a good understanding of certain features in the area and the value of it for residents. A couple of things to look for are; busy throughways, school zones, and traffic patterns. With this information gathered, helps in determining if any of these would be a value to the property. The main reason this approach will now come into play with researches done on recent market prices for in the area of other properties around it that are now in comparison with the appraised home.
With certain items that the property consists of such as hardwood floors, the square footage, additional bathrooms, fireplaces or view lots, the price of the property can now be adjusted if necessary based on the appraiser’s findings. So for instance, if the property being evaluated does not have as many bathrooms as the one it is compared to, but is asking for more in price-the appraiser is able to deduct the value of what the property does not have.
The Key Components Addressed In An Appraisal
Location, View, Topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features….
Quality of construction, finish work, fixed appliances and any defining features
Age, deterioration, renovations, upgrades, added features
Healthy & Safety:
Structural integrity, code compliance
Above grade and below grade improvements
If the property is conforming to the neighborhood
Is the property functional as built – style and use?
Garages, Carports, Shops, etc.
Curb appeal, lot size, and conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood and pull up in front of your home.
When entering your home, they are going to look at overall design, condition, finish work, upgrades, andy defining features, functional utility, square footage, number of rooms, as well as health and safety items. Be sure to have all carbon monoxide and smoke detectors in good working condition.
Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.
The Government’s Influence On Appraisals:
Appraisers hired for a mortgage transaction on conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.
This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans, originated on or after May 1, 2009.
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