One of the benefits of purchasing a home or land is the value that typically comes along with ownership. Many property owners are unsure about how their property is appraised and the factors that are considered in the property appraisal.
There are many different considerations that must be taken into account when appraising property, including market, income, and cost approaches. Appraisals are typically done every few years, but may be done every year in areas with significant activity or growth. Homeowners may often request an appraisal of their property for the purposes of selling the home or simply evaluating how much their property is worth.
Property Appraisal Considerations
When evaluating a property, the appraiser often looks at:
Market value
The appraiser will often research similar home sales in the area to determine a home’s value. They will also monitor how foreclosures in the area are affecting values in the local market.
Improvements
Any improvements to a property may have an effect on its value. Structures like buildings, homes, barns, or sheds typically are considered improvements. Fences or other fixtures are also usually considered as improvements to a property.
Negative features
Appraisers often look for issues with a property that may affect its value including poor accessibility, structural issues, and cost of repairing or replacing structures on the land.
Appraisers usually are licensed by the state in which they are working and typically must complete training and coursework before earning their certification. Lenders will often have appraisers on staff to evaluate properties and give recommendations about property values in a certain market. Appraisers are typically considered an objective third-party entity, meaning they have no financial connection to anyone involved in the real estate deal.
When purchasing a home, the final approval of your loan often depends on the findings of the evaluator. Lenders rarely approve loans for homes that appraise for below the set sales price. If a home appraises for less than the sales price, the seller is often forced to reduce the price of the home to make the deal.
A few well-known appraisal institutions in the U.S. include the National Association of Master Appraisers, the American Society of Appraisers, and the National Association of Independent Fee Appraisers. It is important that your appraiser is properly licensed and approved by your lender before depending on their judgment.
Author: Joseph Devine
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