Many terms are thrown around when buying or selling a home; it can get overwhelming. In this video, Alexis describes an appraisal and how it can be a crucial part of your home buying or selling process.
Suppose the potential buyer of a house wants to use financing to pay. Once the buyer is approved for a loan & finds the home they love, they will order an appraisal. The lender does this to make sure they are giving you a loan based on the home’s appraised value.
An appraisal is opinion-based; there is no exact science to this. However, the appraiser should be unbiased, with no direct or indirect link to the home’s sale.
Pull the Comparables
The appraiser will first pull comparables, which are about six homes within a mile of your potential home that have recently sold with similar square footage, layout, size, and condition. They will compare your potential home to the surrounding houses; this will help them start forming the appraised value. They will then visit and inspect the home (this is separate from an inspection). With the information they gathered online and on-site, they will then give you your appraised value.
For Example
There are two homes (Home A and Home B) in the same neighborhood that are the exact same, except Home A has a pool. Home B recently sold for $250,000, and Home A is listed & under contract for $275,000. The appraiser will look at the condition of the pool (again, not an exact science) and determine if $25,000 is an accurate price adjustment compared to Home B.
What Happens After your Appraisal?
Once you receive the appraisal, if it is higher, you are in luck; you already have equity in that house. If it is low, you now have the opportunity to negotiate with the sellers.
In conclusion, an appraisal is beneficial to the lender, who is lending you the money to buy a home; it also helps the buyer better understand the home’s condition and get the best value for their money.
If you have any other questions about appraisals, please, contact us at info@thenickleygroup.com or give us a call at (407) 906-2456. We’d love to help you with your future real estate needs.