An important aspect of either selling a property at its full value or purchasing a property at less than its full value is having an accurate real estate appraisal. However, you should not think that an appraisal is a full picture of a property’s market value. The primary purpose of a real estate appraisal is to assure lenders that the property for which the loan is being secured is worthy of the loan amount.
In most cases, the lender will have a specific appraiser assigned to properties in your area. In some cases, you may be able to choose from a list of appraisers. The more comfortable the lender is with the appraiser, the more quickly a loan application will be processed.
A good real estate appraisal will have full details of what aspects were considered in the evaluation of the property’s value. Generally, it will include local real estate sales data, property features data, and an estimate of how long it is taking for similar properties in the area to be sold. The property features may be expanded to include special improvements, unique architectural characteristics, and the quality of road accesses. If the property has private road access, the lender will sometimes require an agreement on maintaining the private road.
A common mistake is thinking of appraisers and inspectors as being synonymous. In fact, these two have very different jobs. What they have in common is that they look at properties. However, instead of trying to determine the value of a property, an inspector tries to find flaws with it. So remember that inspectors are there only to figure out whether the properties meet codes or have damages, while appraisers are there to figure out what the properties are each worth.
The value assigned by the appraiser is typically determined by taking into account the prices of similar properties in the area that recently sold, discounting the property for any needed repairs or code upgrades, and taking into consideration any considerable revenue generation characteristics the property may have. Generally, the appraiser’s fee will be known in advance. Be wary of appraisers who cannot give you an estimate. However, if the lender has chosen the appraiser, the appraiser will have to be paid for the transaction to be completed using that lender’s funds.
Finally, it should be noted that a real estate appraisal may be necessary in situations other than the selling of a property. When an estate that includes property is passed on to multiple individuals or when property taxes are being calculated or re-calculated, a real estate appraisal is required.