Let’s talk about what a property appraisal is and how it affects the purchase or sale of your home.

A property appraisal is an evaluation of the property that you’re buying or selling, in order to make sure that you’re at fair market value. We have seen escalation over and above the appraised value of houses when cash buyers move in and are willing to pay more than what the appraised value is for property. We see this happening in numerous states right now.

Commercial property value can also be derived by net operating income, also known as NOI. So, with properties like storage facilities and RV parks, the value is derived by the income that comes in off that property. Mortgage companies will use an appraiser to make sure the money they’re lending is backed by a professional ‘s opinion of what the property is actually worth. An appraiser goes through a process of education and some state apprenticeships before they’re issued a license to give values on property. The great thing about using an appraiser is that it helps to minimize any risk that could be involved. Meaning that you don’t pay too much for a property or sell it for too little. The condition of a property will also have some bearing on the value of the property. An example is if the roof of the house is 30 years old and it needs to be re-roofed, that can be subtracted from the value of the property.

If you’re buying a three-bedroom two bath house and most of the houses in the neighborhood are four-bedroom three bath or five-bedroom four bath, they will subtract the value for the three-bedroom to come up with a fair market value for that property.

When selling your house, it's beneficial to use an appraiser to make sure that the selling price of your house is within the market parameters of reality. If you think your house is worth $1 million and it’s worth $600,000 you have an unrealistic value of your property. By using a professional, you can be sure that your house will sell quickly and for the right price, so you don’t leave any money on the table. If the buyer is going to get a mortgage, almost all mortgage companies will order an appraisal as well.

When buying a house, an appraisal can help you not overpay. The appraiser will look at recent sales in the area you are buying and consider square footage, condition, etc. The school district can also have an impact on valuations as well.

Check out our website for more information on this topic and many more.

Areas of Review

Takeaway

Big picture takeaway points

1. Getting an appraisal helps minimize the risk of the investment, meaning you're not overpaying for the property.
2. Getting and appraisal benefits you when selling as well.
3. Trust the experts, that’s why they are there.

Reflection

Self-reflection questions to think more about the content

1. If I'm selling how can I use an appraisal to help me make the most of this transaction?
2. If I'm buying what steps can I take to make sure, through the appraisal, I'm not overpaying?
3. How can understanding this process save me time and money?