Now for a word that doesn’t have an acronym attached to it: Appraisal.  This is probably one of the most commonly heard terms in the real estate and mortgage world.  But does that mean that everyone actually understands it?  Probably not.  So lets break down the times you need and want an appraisal, what actually affects the valuation and what it technically is.

So lets start with what is an appraisal? When dealing with such a common term I prefer to go straight to the dictionary, otherwise known as Wikipedia; “Real estate transactions often require appraisals because they occur infrequently and every property is unique (especially their condition, a key factor in valuation), unlike corporate stocks, which are traded daily and are identical (thus a centralized Walrasian auction like a stock exchange is unrealistic). The location also plays a key role in valuation. However, since property cannot change location, it is often the upgrades or improvements to the home that can change its value.”

Next up; the expertise level of an Appraiser. I mean, after all, we are putting a lot of faith into this one individuals evaluation of your investment. An Appraisers education is extreme, and for good reason, or at least it used to be.  With todays automation of current market solds, under contracts and on market, this valuation is a bit easier to conclude than it used to be.  According to Wikipedia “the real estate appraiser has the opportunity to reach 3 levels of certification: Appraisal Trainee, Licensed Appraiser and Certified Appraiser. The second and third levels of license require no less than 2000 experience hours in 12 months and 2500 experience hours in no less than 24 months respectively.”

All in all, I would say that they have put in some serious time.   Does this mean they don’t make mistakes? NO, all homes are different, all conditions of homes are different, and lets get real, they are human.  This is a good thing! We want them to stay human, as there are MANY factors in evaluating your homes value and you want to be able to explain all updates and provide that appraiser with up to date comparable’s on the market that a computer just couldn’t manage in all situations.  With all of that being said, lenders do use an automated valuation tool that can give your home an automated valuation based on current sold properties in the area, if the valuation is at or above purchase price the lender can waive the actual appraisal!  You will not know the true value of your home but you will save some money and get your financing needed to close on your purchase.

There are a few other times you will want an appraisal of your property, or one is required by a lender. These are; HELOC (Home Equity Line of Credit), Cash-Out Refinance, Refinance, Short-Sale, Foreclosure, or personal interest (although I would recommend getting a CMA from a Realtor in this case to save you money and get you what you need).

If you have any questions about appraisals, or would like a free CMA (Comparative Market Analysis) done for your home please let me know!


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