An appraisal provides an appraiser’s non-biased opinion of a subject property’s market value.
Market Value vs. Market Price — When we refer to “Market Value” we have to remember that it is not necessarily the same as market price. Market price represents the actual dollar amount put on a property by a buyer and a seller at the time of a negotiated transaction. This might be higher or lower than the value an individual appraiser might place on the property. This difference might be due to differences of opinion or it may be that the property, to this particular buyer or seller, has a greater or lesser value because of some special consideration.
Appraisal Report — Appraisers gather a variety of details to complete a real estate appraisal report. Physical property inspections, public records and other sources are used toward determining a property’s market value. Appraisal data is often obtained from home builders and real estate agents.
Homebuyer Review — An appraisal enables a user to analyze details, such as the property size, final sales price and the condition of properties shown within the report.
Lenders Appraisal Requirement — A lender’s purpose for ordering a real estate appraisal generally involves risk-based decisions. Lenders will order and review a real estate appraisal to determine whether a property meets certain underwriting standards. Lenders require appraisals to ascertain the value of a property before issuing a home loan.
Negotiate the low appraisal — If during the home purchase transaction, the appraised value comes lower than the sale price, then the buyer can negotiate the sale price. If an agreement is not reached, the buyer can terminate the purchase and sale agreement (if the appraisal contingency wasn’t waived)
Timeframe — Real estate appraisals are generally completed within a week.
Cost — Appraisal costs $700-$1,200, it is required by Lender and payed by the Buyer at the time the appraisal is ordered.
When appraisal is needed — Here are some of the recommended times to get an appraisal: purchase and sale, new loan or refinancing an existing loan, estate tax purposes, gift tax purposes, insurance, etc.