So you have decided to sell your home. You have a vague idea how much your property is worth, and you have a certain figure in your mind. You turn on your computer and get out an online house appraisal report from a site like Neighborhood IQ. Despite the report in your hands, there is a trace of doubt lingering in the back of your head. You do not want to undersell your house. You do not want to overprice your house either. An overpriced house stays in the market for long, which results in either long delays in sale or you can end up selling your house for less than what it is worth. An appraiser can help you get out of this dilemma. For a small fee, a certified appraiser looks around your house and prepares a report that tells you the approximate value of your house.
Lenders and buyers
An appraisal report protects buyers against shrewd sellers who may be overpricing their property, and gives sellers the peace of mind because they know they are getting the right price for their property. An appraisal report is essential to buyers if they are borrowing money from a bank. Nearly all banks and other lenders in the United States require borrowers to submit the appraisal report as a prerequisite to a mortgage. This ensures the property a lender is lending against is really worth the loan.
Methods
An appraiser is a state licensed professional. He has a checklist to evaluate your home. Appraisers primarily use two methods to come to the price of a property.
The first and the most popular method is called “comparative market analysis” (CMA). In this method, an appraiser makes a list of properties in your area that have been recently sold and that are similar to your house in size, age, and other respects. He then uses some statistical tools to come at an approximate sales figure for your home.
A second and less commonly used approach is known as the cost approach. In this method, the appraiser calculates the price of a new property by figuring out how much it would cost to replace the structure if the property was destroyed. He then adds other factors such as depreciation to reach at a figure.
Misconceptions
There are some widespread misconceptions about what factors enter an appraisal report to determine the value of a property. The American Society of Landscape Architects says professional landscaping can increase the value of a property by as much as 15 per cent. This shows curb appeal is an important factor.
The materials used in the construction of your house determine its value. Brick houses are worth more than wood houses. However, dirty dishes in your house or your untidy pet does not affect an appraiser’s report.
Fannie Mae and Freddie Mac publish the Uniform Residential Appraisal Report which carries a list of factors that combine together to determine the value of your home. You can buy that report and focus exclusively on the outlined determiners. You may be surprised to learn that you do not need to replace old plumbing. It is sufficient to make sure the old one is functioning.
