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What is an Appraisal?
An appraisal is an estimate of the current market value of a home. This estimate is completed by a licensed appraiser and is calculated by comparing recent sales of homes in the area to the property being appraised.
The home’s value will be determined by researching the current local housing market and comparable properties that have recently sold. It will also include the home’s features, square footage, and the number of bedrooms and bathrooms.
The appraiser will also consider the home’s overall condition as well as the landscaping. They will make a note of any maintenance or repairs that will need to be done.
How is it used in real estate?
Mortgage lenders or brokers require this to ensure that the money they are lending to a new or existing homeowner is a fair amount for the home.
Banks and lenders want to make sure that the buyers are not paying too much for the property.
This is done to safeguard the lender. If the borrower stops making payments on the home and the lender needs to sell it, the lender wants to be certain that it can recoup the loan amount.
Example
Shanique has finally found her dream property in Vancouver and she’s excited to become a first-time homeowner. To secure a loan for the property, she’s been working with a mortgage lender, but before they can approve her loan, they require a property appraisal.
The lender hires Karen, a licensed appraiser, to conduct a thorough assessment of the property. Karen starts by evaluating the property’s location, size, condition, and unique features. She also considers the current real estate market trends in the area.
Karen physically inspects the property, taking measurements and photographs to use in her report. She notes any necessary repairs or maintenance that may be required.
Using all the data she has collected, Karen determines the property’s market value. She takes into account comparable sales in the area, the current real estate market conditions, and any unique features or characteristics of the property.
Karen then creates an appraisal report, which includes a detailed description of the property, the method used to determine its value, and any issues or concerns that may affect the property’s value. The report is sent to the lender, who will use it to make a decision on whether to approve Shanique’s mortgage.
