Determining the value of a property is crucial whether you are buying or selling a home. You may need to secure an appraisal to identify that specific number.
If this is the first time you are buying or selling a home, you may not know much about appraisals. Now is a great time to change that.
By continuing with this article, you can learn more about the appraisal process and its true significance. You will also pick up vital information to help you better navigate Rhode Island’s real estate market.
What Is an Appraisal?
An appraisal is a determination of property value made by a licensed and certified professional.
To perform an appraisal, the appraiser will visit a specific property and examine it thoroughly. They will look over the property carefully and note important details that affect its value.
When they finish the evaluation, the appraiser will create a report with their professional opinion regarding that property. Many people are unaware of this, but appraisals are detailed documents.
The report will contain all the notable aspects of the property in question and contextualize the property regarding the neighborhood.
To give the relevant parties more information to work with, the appraiser will also often evaluate the condition of the real estate market in the neighborhood. They may also project an expected sales time for it.
The report will also feature the specific value deemed appropriate for the property.
It is worth pointing out here that the guidelines for generating appraisals do change. For instance, appraisers now use the ANSI standard for measuring, calculating, and reporting square footage. That change protects appraisers better while also creating more transparency.
Stay up-to-date on those changes to be fully aware of what your appraiser is doing.
Why Is Getting an Appraisal Necessary?
Appraisals are unbiased evaluations of property value. So, why would you need something like that? The answer will vary depending on whether you are buying, selling, or refinancing.
The Importance of Appraisals for Home Buyers
According to the Consumer Financial Protection Bureau, a lender may require you to get an appraisal first before they give you the money to buy your new home. Your lender may even require you to pay for the appraisal itself.
Lenders want their borrowers to get appraisals first to know what kind of deal they are getting. They can better understand the wisdom of making a deal if they know the property’s value at hand.
The Importance of Appraisals for Home Sellers
If you sell your home, you want to capitalize on that transaction. You may be planning to use the money to retire, so accepting a lowball offer is not an option. Of course, some buyers will still present you with lowball offers anyway.
You can shut down those proposals by getting an appraisal. Bring in an impartial third party to evaluate your property and use their findings to identify the number you are comfortable selling at.
Even if a buyer does not like your number, they cannot complain that much. You are trying to make a fair deal, after all. Getting the appraisal done should also help you make contact with more serious buyers.
The Importance of Appraisals for Refinancing
You may also need an appraisal if you are refinancing your home. If you are in the middle of a rough patch, refinancing your home may give you a way out.
Before a lender agrees to refinance your home, they will need an accurate assessment of its value. That is when you will need the services of an appraiser once again. Your lender will consider that assessment as they put together the terms of your new mortgage.
An appraisal could also be beneficial if you have had a previous valuation for so long that you did not know that your home has increased in value. The lender may allow you to borrow more money if that is the case.
What Is the Difference between an Appraisal and a Home Inspection?
While going through the buying process, you may need to pay for a home inspection. After that, your lender may also tell you to get the property appraised. In the wake of all that, you may be wondering why paying for both is necessary.
Well, you are paying for a home inspection and an appraisal because they are not the same thing. We have already detailed what appraisals are all about, so let’s focus on home inspections here.
The goal of a home inspection is to determine the current state of a property. The inspector will examine the different parts of a home and evaluate its safety. They will look through everything, including the wiring, plumbing, and the HVAC system.
Going through with the home inspection is important because you need to know if the property is still in good shape. If it is not, you still have time to go in a different direction. Some buyers also use the results of a home inspection to negotiate lower prices.
You should know that the result of a home inspection is one of the factors that an appraiser may use to determine a property’s value. It is a pretty important factor at that.
How Do Appraisals Affect Transactions?
We have established that getting an appraisal is an essential part of home buying, selling, and refinancing transactions. There is no getting around that.
But what kind of impact will an appraisal have on your particular transaction? The answer to that depends on what kind of valuation you receive.
Appraisal Is in Line or Above Previously Assumed Property Value
An appraisal that is similar to the assumed property value or slightly above it is a favorable outcome for both buyers and sellers.
These types of appraisals usually facilitate the faster completion of the transaction. Some minor haggling may take place, but the assumption with a result like this is that the sale will push through.
Appraisal Is Significantly Lower Than Previously Assumed Property Value
If the appraiser provides a report indicating that the property’s value is lower than what is originally listed, you can expect things to become quite complicated.
The seller in that scenario is in a disadvantageous position. The appraised value of their home may be well below what they expected, so they may be second-guessing if selling is even worth it.
It is also possible that the appraiser’s assessment is inaccurate. Appraisers can still make mistakes, so you should not regard their reports as law. Unfortunately for the seller, that erroneous assessment could cost them thousands of dollars.
In response, the seller may request a second opinion. They may bring in another appraiser, hoping their evaluation will be more favorable to them. Then again, that could lead to the buyer complaining about the new valuation.
You can imagine how bad things may develop from there.
Buyers can benefit immensely from a lower-than-expected appraisal. With a new valuation established, you can use that as a point of reference in your negotiations. Even if the seller wants to ask you for more money, that may not be an option if you are securing funding from a lender.
How Can You Find a Reputable Appraiser?
The consequences of getting an inaccurate appraisal can be costly for sellers. Because of that, you should take the time to look for a reputable appraiser.
Finding a reputable appraiser is easier said than done, but we do have some helpful suggestions that you can try out.
Ask Your Real Estate Agent if They Know an Appraiser
Real estate agents have plenty of connections, so they probably know more than a few appraisers in your area. Ask them who you should hire, and they will point you in the right direction.
You can also ask your realtor to name an appraiser that they already had dealings with in the past. That way, they can tell you what to expect when the appraisal gets underway.
Request References from Your Friends and Family
Feel free to approach any friends or family in the area and ask them if they know a good appraiser. Chances are they could name someone if they moved to that area fairly recently.
Talk to Your Lender about Hiring an Appraiser
Your lender could also refer you to an appraiser. Despite receiving the referral from your lender, your appraiser will still be an independent third party. Count on them to provide an accurate evaluation of the property you are eyeing.
We at RI Home Store are ready to help you navigate the real estate market. Whether you are looking for an appraiser or some good property deals, we are confident that our expertise will prove beneficial to you. Contact us today to learn more about our services!