What is a Real Estate Appraisal?Sunday, March 28th, 2010
Real estate appraisal, property valuation or land valuation is the practice of developing an opinion of the value of real property, usually its Market Value, according to Wikipedia (free encyclopedia). Although some areas require no license or certification for appraising real estate, New Jersey is one state that does require that all appraisals of real property be done by licensed appraisers. For mortgage valuations of improved residential property in New Jersey, the appraisal is reported on a standardized form, the Uniform Residential Appraisal Report.
Lately, there is much talk about the real estate market’s concern about low property appraisals. Many home builders, sellers and real estate agents complain that appraisals are coming in lower than some buyers’ contract prices. Some real estate agents price the home out of line with the market. Sometimes a buyer will come along, who is not informed, and make a bid that is higher than the appraised value of a property. Unfortunately, the appraisal is not done until well into the deal.
In the home buying process, the mortgage lender will send a professional appraiser out to review the property. The appraiser will compare the house you are buying to recent sales in the area. Based on comparable sales, the appraiser will come up with a property value – in other words, “an educated guess of the home’s current value”. The lender does this to protect its own financial interests. If the appraisal comes in lower than the amount you have agreed to pay there is a problem.
The low appraisal actually works in favor of the home buyer. It can help save money on the purchase and can also prevent someone from paying more for a home than it is worth. The down side is that is can add some snags to the process. For example, if your initial offer gets accepted, a low property appraisal could delay the whole transaction. It all comes down to what the sellers do in response to the lower appraisal. If they agree to lower the asking price to reflect the appraisal, then the deal is back on, but if they stick to their original or higher asking price, then you have a big problem and the deal is probably a “no go”.
Never pay more for a home than it is worth – do not start off with negative-equity. It is not always easy to determine the “true” value of a home, especially when different players are looking at different data. If you find yourself in a similar situation, get two different appraisals from two different real estate professionals and choose the lower of the two. This way you are playing it safe.
If you are looking to get a current market value analysis on your property, please contact me. I base my property evaluation on facts and discuss the facts with you, the homeowner. Right Price Analysis will save time and money for every homeowner. Call or email me today and get the Right Price for your biggest investment.