Recently, Palm State Mortgage blog took you on a safari to discover the steps in hunting a mortgage for your dream home. One of those steps is an appraisal, and today Palm State will give you some details about this important step in attaining your perfect loan and your dream home.
You probably know that your chosen dream home must go through an appraisal to ascertain its true value, but what else do you know about the appraisal process? Do you know what an appraisal report should include? We will answer these questions.
After you have hunted down your dream home and discovered its price tag, then you and the seller will want to know the real worth of the home. Then it’s time to call an appraiser!
Definition of an Appraisal
Put simply, this is the “part of the mortgage process in which both buyer and seller must depend on the expert opinion of a stranger. A real estate appraisal is simply that — the expert opinion of a certified, state-licensed professional who determines the value of a piece of property.”
Let’s look at this in crystal clear numbers: If your $360,000 dream home is really worth only $260,000, then the home is overpriced.
Two Pathways to the Appraisal
There are two main ways the appraiser will utilize to evaluate your dream house.
I. The Sales Comparison Method: The appraiser compares the property with a few comparable homes in the same. (In fact such homes are called “comps,” which is short hand for “comparables.”) Using this method, the appraiser will assess:
The lot size,
The square footage of finished and unfinished space,
The style of the house,
Special features such as workshops, garages and fireplaces,
And the age of house.
II. The Cost Method: The cost method is popular for new property. Using this technique, the appraiser will estimate what it would cost “to replace the structure on the property if it were destroyed.”
Additionally, the appraiser will also examine the land value and figure depreciation. Ultimately, these factors will be taken together will determine the worth of your dream home.
In the course of using either of these methods to evaluate a home, an appraiser will investigate many sources of information. As you might imagine, the starting point might be a physical inspection of the property.
An appraiser often studies county courthouse records as well as recent local real estate reports.
All of this will probably cost you, the buyer, at least 300.00, but if you take a look at the check list below, you will consider an appraisal well worth the cost. It is more than the value of the property; it is the story of your dream home.
What Is In Your Appraisal Report?
1. Facts and Figures: You should receive an explanation of how the appraiser arrived at his or her estimated value of the property.
2. Beyond The Walls: The pages will detail the size as well as the condition of the house.You will get information about permanent fixtures, and with improvements that have been made and what materials were used.
3. Total Disclosure: You should receive important statements describing serious structural problems.
If you are buying a wet basement or a cracked foundation, this document should reveal the problems.
5. Observations: No home exists in a vacuum. The appraiser will make notes about the area around your dream home. You will want to know if it is a new an established development or you might need special information on rural acreage.
These statements are called the appraiser’s “Notes.”
6. What Is Trending? The appraiser will include an “evaluation of recent market trends of the area that may affect 
the value. Likewise, the report should list a “comparative market analysis that supports the appraisal.”
7. Pictorial Evidence: Researched maps, photographs or sketches might be in the report.
One final important fact about the appraisal is that your lender will not finance a larger amount than the one stated in the appraiser’s report.
This document is meant to protect everyone: the buyer, the seller, and the lender. A good appraisal brings you one step closer to attaining your dream home!
