Why get an Appraisal?
For many Americans, owning a home is essential in the fulfillment of the American dream. Ownership conveys many economic benefits, such as the ability to accumulate wealth—tax benefits for mortgage interest—greater access to credit through building home equity—long-term savings over the cost of renting.
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Naturally, many attempt to buy, sell, or refinance their portion of the American Dream, and most of these transactions must include a real estate appraisal. A real estate appraisal employs a housing expert to perform a valuation for either the buyer or the seller in the transaction. The valuation that is offered by the appraiser is then used by the hiring party to make important decisions during the transaction process. In fact, there are many reasons why the services of a Certified-Licensed, independent Real Estate Appraiser may be of value to a home buyer or seller.
Selling A Home - Whether homeowners choose to sell a home on their own or use the assistance of a real estate agent, an independent-professional appraisal can assist them in making an educated decision when determining a selling price. Unlike a real estate agent, an appraiser has no vested interest in the selling price of a residence. Thereby, it's easy for them to step in and provide unbiased information to help sellers make informed decisions. Seeking a professional appraisal can ultimately help homeowners determine a fair and attractive price when selling their property.
Purchasing A Home - Whether a buyer is purchasing a first or successive home, they are likely faced with the task of determining if a potential property is listed at a fair price. Many buyers may likewise be tasked with settling on a fair price for a potential offer. In these cases, a professionally commissioned appraisal report can provide buyers with an independent opinion of the current housing market and the estimated property value and potential of a prospective home.
PMI Removal - Private Mortgage Insurance—or PMI—is a supplemental insurance that lenders may ask home buyers to purchase in the event that the amount being loaned is more than 80% of the value of the home. This supplemental insurance is of course at the expense of the home buyer and serves the purpose of protecting the bank in the event that the loan is foreclosed. Very often, the cost of the PMI becomes an additional fee that is added to the buyer's new monthly mortgage payment. Ultimately, home buyers who are unable to offer a 20% down payment will find it necessary to finance PMI.
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​One of the main issues involving PMI is that many buyers never remove it when their mortgage becomes eligible by federal law. While the Homeowners Protection Act of 1998 requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met—when a homeowner has paid off 80% of what their home is worth—many homeowners fail to petition their mortgage lender for this removal at the earliest possible time. Through market appreciation or principal pay-down, homeowners' mortgages may fall below this 80% level undetected. To prevent this costly mistake, smart homeowners will employ a certified real estate appraiser to determine if they have met the 80% loan-to-value requirement; thereafter, these homeowners can provide their lender with an appraisal report. The cost of the appraisal is very often recovered in just a few months of no longer having to pay the PMI.
Divorce Settlement - In most divorce cases, the court won't usually force the parties involved to "buyout" the other party's interest; but, the court may order the sale of the home so each party gets an equal share of the equity. Regardless of the situation, it's a good idea to order an appraisal so both parties are fully aware of the home's true market value. Should the parties want to sell the home, they will have a better idea in setting the offering price with a certified appraisal report. An appraisal in case of divorce ultimately ensures that both parties will feel like they've gotten a fair assessment and share of the split assets.
Estate Liquidation - Whether a loved one has passed, a marital separation has occurred, or multiple parties stand to gain shared possession of an estate, an estate's liquidation involves assessing its property using Fair Market Value (FMV).
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In most cases, an estate's property makes up a disproportionate share of the total estate value. Thereby, the logical first step in fairly disposing of an estate is to ascertain its true value. In the matter of the estate's property, the appraiser helps determine the true market value. Then, equitable arrangements for the estate's dissolution can be made by any disputing parties.
Retrospective or Date of Death Appraisal - The loss of a loved one is a difficult time and settling an estate from a death—or probate—can feel like an added challenge amongst the countless arrangements to be made. One important task family members must accomplish during the probate process is securing a date-of-death appraisal—also known as a date-of-death valuation. A Date of Death (DOD) appraisal refers to an appraisal that is retrospectively assessed to the date of passing; this appraisal is used for tax income purposes and to establish the value of the deceased's estate. This valuation often requires an appraisal to establish Fair Market Value (FMV) for any residential properties owned by the deceased's estate.
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Retrospective Value is used to assess a DOD appraisal and is generally defined as: “A value opinion effective as of a specified historical date." Rather than using current market values to assess the worth of a home, Retrospective Value determines the value that a property held on specified, previous date. Retrospective Value is frequently sought in connection with property tax appeals, capital gains, separation, net worth, damage models, lease renegotiation, deficiency judgments, estate tax, and condemnation.
Home Improvements - Before you decide to sell your home, there are several decisions to be made. First and foremost: "How much should it sell for?" But, don't forget there may be other equally important questions to ask yourself, such as: "Would it be better to paint the entire house before we sell it?," "Should I put in that third bathroom?," "Should I complete my kitchen remodel?" Many improvements that buyers make to their houses have an effect on a property's value. Unfortunately, not all of home improvements have an equal effect. While a kitchen remodel may improve the appeal of a home, it may not add nearly enough to the value to justify the expense.
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The dilemma of deciding which improvements are likely to yield value are best left to the expertise of an appraiser. An appraiser will be able to calculate how much value a home stands to gain with certain improvements. Using an appraiser when deciding to improve a home will ultimately help homeowners minimize improvement costs and maximize selling value.