Home appraisals
Home appraisals have become very powerful tools in appraising the value of a home before any purchase is finalized. The appraisal is part of the complicated home purchase process and there are different ways of appraising a property, depending upon the location, intended use or amenities attached to it. No two properties are identical; hence it becomes difficult to classify the price range of any property, based on certain common features. Home appraisal companies are available in the market, which specialize in appraisals and have expert knowledge concerned with the trade. Appraisers report are normally detailed reports which classify the property based on features of the location as well as the property. Details like land value, market rates, location specifications, availability of amenities, advantages and disadvantages of the property as well as expected appreciation are included in the report. They shall include various facets that affect a person’s daily life like availability of transportation or proximity to schools or hospitals, thus justifying the price that they have attached to the property.
Home appraisals are carried out based on three different methods. One is the sales comparison approach, which takes into consideration the value of recent sales of similar properties in the area. This price is kept as a basis and then the value of additional amenities are added and value of those not available is reduced to arrive at an approximate value for the property. Another method is the cost approach. This approach is used for homes which are newly constructed. In such cases, land value is added to the cost of construction and the total gives you the approximate value of the property. The third and not so common approach is the income approach and is used for income generating commercial properties. This takes into consideration the market scenario, dynamics of the sector as well as demand and supply patterns.
Appraisals have become so critical because it affects not only the seller and the buyer, but also influences the decision of the lender as far the mortgage financing is concerned. Even if the appraisal value of the property is less than the approval that you have got for the loan, it is highly unlikely that the lender shall release the entire amount as approved. This is because he feels that you shall end up using these funds for personal reasons, which makes the loan cheaper than actual personal loans that are available in the market, thereby robbing him of precious interest income, which he would have gained in case you had availed a personal loan from him. Home appraisal companies have experts on their ranks who have tremendous knowledge on how to take different factors into consideration while appraising a home.
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