When it comes to purchasing a home, buyers often put a great deal of focus on finding the property of their dreams. While this is undoubtedly a fun and exciting step, it is not the only important part; it is equally important to complete an appraisal process. An assessment is an in-depth, unbiased assessment of a home's actual value. Without a doubt, every buyer should have an appraisal performed before they complete a home purchase.
If your home-buying process involves securing a mortgage, an appraisal may not be an option. Lenders typically include the appraisal as part of the final analysis before closing the loan. The main reason that banks require this step is to protect their interest.
The bank does not want to secure a mortgage for a home sale that is higher than the home's actual value. If a buyer makes an offer for a home, but the property appraises for a lower amount, the buyer will need to submit a request for an appraisal review or make up the difference in value in cash.
Fair Price Review
Even if you are using cash to make the purchase, it is equally important that you protect your interest. For cash buyers, it is vital to have an appraisal performed so that a fair price review can be conducted. Sellers have a lot of wiggle room when it comes to pricing their homes, and sometimes, they overinflate the value of their homes.
As part of the appraisal, the property will be compared to similar properties within the area to assess whether the asking price is on target with the fair price for similar homes.
In addition to using the information from the appraiser to ensure the home is valued fairly, buyers can also use this information to analyze the potential for equity. Owning a home means that you have a place to call your own, but it also means that you have the potential to hold a large asset with equity.
As you review the values of similar homes, you can view their growth to see how much equity they have gained. While many factors influence the market, you can at least use this information as a gauge of just how much you can expect the home's value to grow should you move forward with the purchase.
To learn more about arranging a real estate appraisal for a home, speak with your real estate agent for assistance.