Appraisals play an important role in the home selling process, by helping to set trusted parameters for the price of the home, and by extension, the mortgage loan amount for that home.
An appraisal is an estimate of your property's fair market value, i.e., how much your property is worth. It also helps you know how much a lender will give you for a property.
You can obtain an appraisal from a licensed appraiser. When appraising a property, an appraiser will consider:
Appraisals aren't home inspections. Inspections look instead at wear and tear, hazards, and damage to a property. If you're considering purchasing a property, a home inspection is still recommended/required, even if the home has been appraised.
A property's appraised price does not necessarily have to match its listing price. Of course, in the seller's best interests the appraised price should match the listing price, but if there is a significant difference then the seller might be well-advised to revisit the pricing of the house - usually by consulting with a trusted real estste agent.
This applies whether the appraisal is higher or lower than the listing price. But when the appraisal value is higher than the listed price of the home, that may provide the seller with distinct negotiating advantages and bargaining power.
Appraisals affect how much lending companies will give you in mortgage loans. They act as an unbiased estimation of the property's fair market value and so keep lenders from giving you too much.
If an appraisal is lower than the purchase price of the home that you're interested in, then your lender will give you a loan that's based on the loan-to-value (LTV) ratio stated in your proposed contract with them. This LTV is representative of how much of the property the loan will cover.
If an appraisal is higher than the property's purchase price, then you're in luck. You're getting the property at cheaper than its market value. Your mortgage amount won't change because the selling price won't rise to match the appraisal.
Appraisals can be helped by doing the following before the appraiser comes round:
It can happen that you've agreed to pay more for a home that ended up having a low appraisal. In this case, you can:
Understanding appraisals helps you better navigate the property purchasing process. Leveraging this knowledge will make your property purchase or sale smooth and seamless.
We hope this article was of value to you. For more great tips, bookmark our site and for all your mortgage needs, visit the A Team at TMFFMS.
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