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Home loans and the relevance of Home Appraisals

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So, after all those efforts you finally found the house of your dreams. That brings us to the next question- What is the asking price of the same? If the asking price is $250,000 and is equivalent to the amount you have been already approved by the bank for a home loan, is it the time to rejoice the moment or get into some serious calculations and look at the other aspects too. Another important question which comes next is, whether the house is worth the asking price?  How to ascertain it? Will the banks make a disbursal only knowing the asking price or they will take steps to ascertain the same.

Banks generally get the value of the house ascertained by the team of their experts and the process is called home appraisal. Under the process the actual price of the house is calculated depending on the prevailing market conditions and against the asking price of the sellers. So, it is the home appraisal which will determine whether the asking price of the house is high or low.

In case the home appraisal value is less than the asking price of the house, it means that the house under consideration is overvalued. The banks will always make a loan offer depending on the appraised value of the house. Which means that the loan amount will be less and the borrower will have to arrange for more funds to purchase the house?

Referring to the asking price of the house which was $250,000, if the appraised value comes to only $200,000, the house is overpriced. As a buyer, you need to be cautious making a buying decision. You need to look at all the aspects before you get to a final decision. Home appraisal can act as an eye opener for you and will protect you against any losses.

Home Appraisal Methods

One you apply for a mortgage loan from a lender, the lender gets the property evaluated by the approved appraisers. This can give you an assurance that the property you are taking is genuine and the validation is done by the banks itself. The cost of the appraisal is to be borne by the borrower and the same is a part of the closing costs which they need to provide to the lenders at the time of the disbursal of the no credit check payday loans. The amount generally comes to around $300.

There are different methodologies used to carry out the appraisals. However, the primary ones includes:

Sales comparison approach –  Under this method, the appraiser compares the property under consideration with the recently sold property of a similar nature and with more or less similar facilities in the vicinity. There are different factors included in the appraisal and it includes size of the plot, Area of house, year of the construction, facilities like garages and fireplaces, lawns etc.

Cost approach – This method is generally used to appraise the newly built houses. Under the process, the appraiser analyzes what would it cost if the property were to be destroyed and reconstructed.Other areas looked at are the value of the land and the depreciation if any.

Home Appraisal Process

Under the process, a physical inspection and verification of the property is done. Te appraiser may also check on the county courthouse records and the reports from the local listing services. The general make up of the appraisal report includes:

A detailed explanation of the way in which the appraiser reached to the conclusion on the valuations of the property.

The size, build quality, depreciation, and other permanent fixture specifications. It also includes any of the improvements and enhancement or renovations on the property.

Any structural flaws like sewerage issues, leakages or wet basements can be found here.

Recent reports and the market trends related to the property in the nearby location and even the future prospects of the property.