A home appraisal inspection is not the same as a home inspection. The home appraisal inspector works for the bank that will be lending you the money to purchase your new home.
The main reason an inspection is required is that the bank wants to ensure that the money they are lending you is valued at the price you and the seller have agreed upon. In short, they don’t want to lend you $500,000 for a home that is only valued at $400,000.
This report protects their vested interest in the home.
The main benefit of a home appraisal, is that this appraisal report makes sure that you are not overpaying for a property.
Other Reasons for an Appraisal
Estate Purposes: If you are looking to consolidate all your assets and wish to set up wills and trusts, a full valuation of all your assets will be in order. Majority of the time this includes real property.
Divorce will fall under this as well, to ensure that there is fairness in the division of assets.
Bankruptcy is another reason since the court would need to see a complete value of all your assets including real property.
Selling A Home: Some sellers that want to sell a home but not necessarily at any specific time frame will sometimes obtain a private appraisal to know what their home is worth. Or people who decide to sell the properties themselves without the use of a real estate broker.
Buying/ Selling a Home Without Financing: For instance, your mom is selling her home to you and you want to pay cash. This is not considered an arm’s length purchase. An arm’s length transaction is where the buyer and seller act independently of each other with their own self interest to get the best deal they can.
A seller financed home that you chose to purchase would also benefit you to get a home appraisal done.
Refinancing Your Home: Since you are obtaining a brand-new mortgage, your lender will require this. In the event the value of your home has gone up, you may be able to take some cash out upon securing a new loan.
Tax Assessment Appeal: This is based on the fair market value of other similar homes in your area. If the neighborhood is in decline for instance and the taxes have not adjusted and think they are too high, in getting a private appraisal you can show that the home is worth $400,000 instead of the $500,000 that the county is assessing your property taxes at.
Home Equity Loans (HELOC)/ Other Loans: Again, this protects the bank when you are looking to secure other types of loans wherein your home will be used as collateral. The bank will want to ensure that the money it is going to lend you is supported by the property value.
Private Mortgage Insurance Removal: For the bank to remove this additional fee called PMI, they would need to see an appraisal report that states you have obtained 20% equity in the home.
Final Thoughts:
To make the most out of your appraisal, make sure the curb appeal of your home is in tip top shape when the appraiser comes by. The overall appearance of your home can make a difference.
Keep the records of all home maintenance or improvement costs for kitchen and bath remodels or upgrades. You won’t be recouping the full value of these renovations but it provides a good benchmark if you are not in agreement with the condition assessment provided in the final report.
Link: https://docs.google.com/document/d/167JQnLGm840js0nD_-dUXTnUD-Ocmw87/edit?dls=true
