Home buyers have to depend on real estate appraisals that facilitate in arranging finances
by Arina Smith Real Estate 16 May 2018
Anyone conversant with the real estate industry would be familiar with real estate appraisals. Appraisers are licensed professionals qualified and trained to assess the value of any property. From the financial institutions and banks engaged in lending for real estate to the court of law, everyone depends on real estate appraisal reports, which underlines the importance of appraisers. Not only appraisers have to acquire a license from the state but also, they should only appraise properties to which they have no relation in any way and are true third-party assessors. Assessors charge fees for their service, which either the buyer pays when availing the service or they add it to the settlement statement and receive the payment at the time of settlement.
Obtaining a license :
The appraisers have to pass a test to qualify as professional appraisers for obtaining a license. Besides a basic educational qualification that is necessary to appear for real estate appraisers exam, the incumbent may or may not have any experience in the industry. Exposure to the real estate industry could make it easy to pass the test and with helpful resources like www.appraisaltests.com it could become even easier to obtain an appraiser’s license.
Features of an appraisal report :
To assess a property with the purpose of ascertaining its value, appraisal reports emanate from a detailed inspection of the site together with an analysis of sales data for properties located close by. Appraisals are techno-commercial exercises that establish the value of the property. The report includes details of the subject property and takes into consideration the overall real estate market of the place as well as comparisons with similar properties in the vicinity. The report also highlights issues that affect the value of the property adversely, such as inconvenience faced in accessing the property. It also takes note of flaws in construction, design or structure of the building like defects in the foundation or other parts. The report also provides an estimated time for selling the property that has relation to the validity of the report.
Methods of appraisal :
The sales comparison approach and the cost approach are the two methods that appraisers follow in drawing an appraisal report.
- Sales comparison approach: The appraiser identifies similar properties sold in the area (comparables) and compares prices to determine the value of the property. Since the features of similar properties would not exactly match with the subject property, the appraiser has to make suitable adjustments to bring them at par so that it would be like comparing apples to apples. It helps to interpolate the price that the other properties would have fetched had it the same features as the subject property.
- Cost approach: This is mostly applicable for new properties where the elements of the cost involved in construction are available. The appraiser estimates the cost of replacing the property assuming it gets demolished.
Home loan lenders depend on appraisal reports to decide the feasibility of lending against any property for which appraisals are most important for homebuyers.
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