There are only a few milestone moments during the real estate process: contract ratification, home inspection, and appraisal. The appraisal is arguably the most important part of the whole real estate process.
What is an appraisal?
According to Wikipedia, â€œa real estate appraisal is the process of valuing real property.â€ If you heard that definition you would still have no idea what is the meaning of an appraisal. In laymanâ€™s terms, an appraisal determines how much your new home is worth based on the appraiserâ€™s research of homes sales in the neighborhood. The appraiser is a certified independent contractor hired by the bank to create a non-biased report. In an attempt to maintain this autonomy, neither the parties (ie. buyer, seller, agents) nor loan officer has direct contact with the appraiser.
Why is an appraisal important?
An appraisal is important because without an appraisal to determine the value of the home, the bank will not be able to lend you money to purchase your dream home. The bank will only finance up to the appraised value of the property.
What can I expect in an appraisal report?
The appraisal report will consist of a detailed comparison of the subject property to nearby listings and sales within a 1 mile radius, usually within a 3 month period. The appraiser will make adjustments to the subject property value based on square footage, amenities, age, and energy efficient features. The appraiser will also take into account market conditions such as bank foreclosures and short sales, which will negatively impact property values.
What are the obstacles with appraisals?
Since the downturn of the real estate market, banks have placed more restrictions on appraisers to hedge the banksâ€™ financial risk with properties. The most common obstacle for appraisers is finding comparable properties within a 3 month timeframe required by lenders. From a realtorâ€™s perspective, the problem with appraisers, is identifying if the appraiser is familiar with the neighborhood. Many lenders use an automated service to assign an appraiser to a property. If the appraiser is not knowledgeable about the neighborhood then you can often find an inaccurate assessment of the propertyâ€™s value. An incorrect valuation can prevent the transaction from closing.
What is the timeframe for an appraisal?
A lender will usually order an appraisal for a property a few days after the purchaser completes the loan application and a ratified contract has been submitted. A Conventional and FHA appraisal can take from 2 to 7 days. The VA appraisal can take up to 10 days.
Hopefully you found this post useful! If you would like more information about Washington DC real estate, please contact Jason Trotman at 301-452-4767. If youâ€™re new to DC, Iâ€™d especially like to extend a warm welcome. I value the opportunity to help my clients find the home that meets their needs and provide them with professional, reliable service.