APPRAISALS IN TODAYS’ MARKET
November 20th, 2008 categories: Buying, Selling
Appraisals are not some mysterious mumbo jumbo that has to happen before your loan is approved. The purpose of the approval is to protect the lender. Appraisers are being tougher today than they were a few years ago because the lenders don’t want to be stuck with a property that is worth less than the buyer is willing to pay for it. The appraisal is key to the loan being approved.
- How do appraisers determine the value of a home? For new properties the cost approach is frequently used–how much would it cost to build the property today. Resale homes are usually priced by comparing sales of similar properties in the building if the home is a condo or similar properties in the area if it is a single family home, townhouse, or multi-unit building.
- What is included in an appraisal? Of course there are a lot of details about the subject property and comparisons to similar properties. An evaluation of the general house market in the area is part of the report. Any problems in the structure of the home are also included–foundation problems, broken window seals, roof leaks, bad electric panels, etc. In a condo building, the appraiser usually asks for the management company’s name and phone number so they can find out what repairs have been made recently and what repairs are being planned.
- What do I do if the home I have selected doesn’t appraise? One thing you can do is to pay for a second appraisal and hope for a different result. Probably the best thing you can do is be sure your Realtor prepares a thorough and accurate Comparative Market Analysis before you write and negotiate a contract. And sometimes the solution is a re-negotiation of the sales price. Any serious seller understands that the buyer can’t possibly pay more than the bank will lend. If YOU are the seller, be sure your agent is at the appraisal armed with a Comparative Market Analysis and that they have asked the appraiser what information they need–a copy of the contract or anything else.
And there you have it–Appraisal 101 in today’s market! Any questions–I am at 312-981-2360 or just e-mail me.
This entry was posted on Thursday, November 20th, 2008 at 11:49 am and is filed under Buying, Selling. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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