An appraisal is important because it protects your investment. It's there to ensure that, as a buyer, you don't pay more than what the house is actually worth. It's there to prevent home values from rising beyond feasible limits. It's also important to secure funding.
The lender wants to make sure they have an asset that they can sell to recover their money in the event of a default. A home appraisal is also a way to see if the home you want is overpriced or not. Find the Exact Value of Your HomeThe appraised value of your home is basically an unbiased and accurate value. An accurate home value offers the same benefits for buyers, sellers and lenders.
If the appraiser expects a percentage of the home's value to be paid, it may be a sign of an unethical practice, which should be avoided. An appraiser will take note of the obvious problems, but will not inspect the home to see if it complies with the code. Once the appraiser has gathered all that information, they will compare your property to other comparable homes that have recently been sold in your area. Similarly, appraisers must comply with a strict industry code of ethics and observe national standards of practice for appraising real estate.
Appraisers will also check for major home improvements, especially improvements to the bathroom or kitchen. Getting an appraisal is also a mandatory step when giving a home to a family member as an equity gift. The appraisal must be paid by someone regardless of whether the sale takes place, which can mean sunk cost to the buyer if they don't end up buying the home. When refinancing a mortgage, if the appraised value places the equity in your home at less than 20%, you'll need to pay private mortgage insurance (PMI).
In a refinance transaction, an appraisal assures the lender that you are not giving the borrower more money than the home is worth. While appraisals help buyers avoid overpaying for homes, a seller may think that a low appraisal is inaccurate and reluctant to lower the price. While many potential home buyers and sellers may focus solely on the home, appraisers actually take the entire parcel of land into consideration. Because the appraisal primarily protects the lender's interests, the lender will normally order the appraisal.
You can also request another home appraisal, keep in mind that you are the one who pays for these appraisals. If you are the seller, it may even be useful to give your appraiser a list of all the updates you made to the home when you owned the home. When the appraiser has finished his assessment, he will issue an appraisal report, which contains the official valuation of the property. While you can't change the location of the property, you can do something about other factors that could lower the home appraisal.