Appraisal: An assessment of the market value of property.
Appraisal: A determination of home made by a professional appraiser – a qualified, unbiased expert – that looks at the initial purchase price and compares it with recent sales of similar homes in the area. Courts commonly order appraisals in probate, bankruptcy, or foreclosure proceedings in order to determine the fair market value of property.
Real Estate Appraisal: Know Your Worth
Real estate appraisal is the determination of the market value for real property. Real estate transactions often involve appraisals because each property is unique in terms of condition and location.
Appraisal reports form the basis for mortgage loans and foreclosure proceedings in order to establish a sale price for a property. Homeowners often have a higher opinion of their home values than appraisers do.
All mortgage companies or banks require a home appraisal before they can approve financing because the home functions as collateral for the loan. If for any reason the homeowner defaults and the home goes into foreclosure, the bank will need to sell the property to repay the loan.
One key element that has an effect on appraisals is whether or not the home has been upgraded, though it can be a double-edged sword.
“If all of the homes in your area have updated kitchens, you could potentially see an increase in value if you renovate your out-of-date kitchen,” says appraiser Chris Todd. “On the other hand, if you sink a lot of money into finishing your basement and none of the other homes have that amenity, you’ve over improved for the area and won’t see much increase in value.”
“Again, it all comes down to conforming to the neighborhood. Before you make any big changes, put yourself in the buyer’s shoes. Would they really want to lose the comfort of parking in a garage for an additional living area or workout space? In our market, most likely not,” Todd adds.
In order to have all upgrades accounted for, it’s important for the homeowner to provide the appraiser with a list of improvements.
According to Michelle Ackerman, a broker and market manager at in Colorado, “It is perfectly acceptable to provide the appraiser with a list of features or upgrades in the home. In fact, it is helpful when the appraiser goes back to his office to prepare the paperwork. Be sure to include items that might not appear in the appraiser’s photograph such as central air, the efficient HVAC system as well as the obvious solid surface countertops and the finished basement.”