Appraisals 101

Lenders require both the borrower and the property qualify for a mortgage. The property value is determined by an appraisal, which is meant to protect the bank and the consumer.

Many consumers cringe at the idea of an appraisal, but there is nothing to fear! An appraisal is meant to protect not only the banks interest, but the buyers. 

“An appraisal provides an unbiased market value of a home, for both the bank and the borrower,” says Laura Callahan, owner of Callahan Appraisal Services.  “We determine the value based on many factors, and look at how each factor plays in the local market.”

An appraisal is based on local supply and demand, comparable properties, as well as the principle of substitution. Unlike what many people think, the price a buyer and seller have agreed on IS considered. “What a buyer is willing to pay is an indicator of the local market,” states Callahan. 

An appraiser starts fresh with each property, reviewing the most up-to-date data on the local housing market. They then review comparable properties, properties located with the same area as the subject property with similar use and square footage. Financing conditions related to the sale of the comparable properties are reviewed. So, there is no need for homeowners to fret over the sale of a neighboring home to a relative below market value. 

The physical condition of the home plays a large role. An appraiser recognizes a four bedroom; 2,000 square foot home with a state-of-the-art kitchen is worth more than a home with an identical footprint, but original kitchen.

Some of the recent concerns regarding the process stem from Fannie Mae and Freddie Mac kicking back the mortgage and requiring a desk appraisal or field appraisal. This happens when the original appraisal is anywhere from 8-15% higher than the information Fannie Mae and Freddie Mac obtain electronically.  

A desk appraisal simply means a second person reviews the paperwork to double check the information and ensures the proper procedures were followed.  A field appraisal requires that a second unbiased appraiser visit the property and conduct a review.  The concern for many buyers and sellers is when they receive an appraiser who is not familiar with the local market.  “You can always request a review by a local appraiser,” says Callahan.

For more information regarding the process please visit http://www.realtor.org/appraisal

If you have questions or comments please feel free to email Paula at paula.ostop@raveis.com

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.


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