Appraisals are an important part of the real estate process as they provide an objective valuation of a property which can be used to determine its market price, secure financing, settle legal disputes, and much more. Appraisers are licensed professionals who use a combination of property inspections, market data, and industry standards to arrive at an unbiased estimate of value. Today, we will explore the top 10 reasons to get a real estate appraisal.
Mortgage financing
The most common reason for an appraisal is to secure financing for a home mortgage loan or refinance your existing loan. Every mortgage loan requires an appraisal to assure the lender that they are not lending more than the property’s value. In the event of a default, the lender wants to protect themselves from losses; therefore, the appraisal is used to set the loan amount. Additionally, this ensures that the borrower is not overpaying. While appraisers are bound by code of ethics, appraisals for mortgage financing are typically ordered by the lender through an appraisal management company (AMC) to further ensure the appraisal is impartial and unbiased.
Thinking about moving
If you’re thinking about moving, selling your home is typically the biggest factor to consider. An appraiser can provide a detailed analysis of the local market, comparable sales, and an accurate estimate of your home’s worth. Correctly pricing your home is essential for a smooth transition as it will sit too long on the market if overpriced and money will be left on the table if underpriced. Good pre-listing advice can attract more interested buyers, potentially leading to a quicker sale.
Considering renovating
An appraisal can help property owners make informed decisions about which upgrades or renovations to make and which one to skip. Adding an inground pool could increase your property value but it may not be a good return on investment. Over-improving a house could be an issue as the value added may not equal the cost of the improvements. By getting an appraisal, property owners can ensure that they are making smart investments in their property.
Trouble selling
Has your house been on the market for a while with little to no offers? It may be time for an appraiser. By getting an appraisal, you can identify any potential issues impacting your marketability, such as necessary repairs or an unrealistic asking price. Additionally, with the recent uncertainty and swings in interest rates, some property values have drastically changed. It’s essential to have an objective assessment of your property’s value.
Probate/estate planning
When a property owner passes away, their assets are typically divided between their heirs or beneficiaries. When disputes arise over property value, an appraisal can help navigate this complex process by providing an unbiased estimate of value. Additionally, an appraisal can be used to help homeowners plan their estate by making informed decisions about one of their largest assets. For example, if a homeowner wants to leave their land to their children, an appraisal can help ensure there is a fair distribution of assets.
Divorce settlements
Divorce is never easy and it can become complicated when dividing assets like land. In many divorce proceedings, the property must be appraised to accurately determine and divide its value between both parties. This is especially important when parties disagree on value or if there are multiple properties. An appraisal can help resolve disputes and ensure that the property is divided fairly.
Property taxes
Property tax assessments are often based on the appraised value or a percentage of the appraised value of a property. Therefore, it is important that the homeowner verifies how their local municipality calculates assessed value. An appraisal can be used to challenge an incorrect property tax assessment or help the owner plan for a higher tax bill in the future.
Insurance coverage
Adequate insurance coverage is crucial in case of damage or loss to your home, but many property owners are unsure how much coverage they require. An appraisal can help determine the correct amount of coverage needed to protect the property in case of a disaster. It’s always a good idea to be prepared.
Becoming a landlord
With smart decision making and reliable valuations, becoming a landlord is a great way to generate passive income. Whether you intend to live in one unit or rent out the building, getting an appraisal provides an accurate assessment of the property’s value and market rental income which is essential in determining investment potential. In addition, an appraisal can identify any necessary repairs or upgrades that may need to be made before the property can be rented out.
Complying with legal requirements
Lastly, there are certain legal situations in which an appraisal may be required. The government may require an appraisal for eminent domain. Zoning changes may significantly impact a property’s value and highest and best use. A conservative easement (which permanently protects land from development) can drastically impact value and may qualify for tax benefits. These are only a few examples where an appraisal may be necessary to comply with legal requirements.
Whether you are buying, selling, refinancing, or simply trying to make informed decisions about your property, an appraisal can provide valuable insight into the value of your property. By working with our experienced appraisers, you can ensure that your valuation is accurate, objective, and thorough.
Do you have any experiences with appraisals? Let us know your thoughts in the comments below!