When buying and selling real estate, one of the key steps that must be taken is simply getting an appraisal of the property in question. This is intended to determine the exact value of the property. It may differ dramatically, for instance, from estimates you’ll find on an online listing.
Now, a seller is not obligated to sell for this price, nor does a buyer have to pay this exact amount. But it’s an important part of the process because someone who is going to finance the purchase may not be able to secure a loan if the appraisal is much lower than the amount of money they need in that loan. The lender won’t want to risk it since a buyer who defaults and loses their property would not have a property that was actually worth enough to cover that debt.
What an appraiser looks for when they’re doing their appraisal
The appraisal process involves a lot of different factors, but here are a few things that the appraiser may note that could lower the value:
- A home that does not show well and has a poor, unkempt appearance
- A home in need of major repairs, like a new roof
- A home with an identifiable problem, like black mold or a termite infestation
- A home in a declining neighborhood
- A home surrounded by low-value comps, or comparable homes, that have recently sold
- A home in a neighborhood that is moving toward rentals instead of owner-occupied homes
Essentially, it’s important for a home to be in optimal condition if it’s going to get a high appraisal. This is why many sellers will make repairs before selling; they know that it’s worth the investment.
If you’re involved in a property transaction, especially if there is a difference between the expected values and the appraisal, be sure you know what steps to take to protect your interests.