Frequently Asked Question
Why Order a Home Appraisal Appraisal From Us?
What are common types of appraisals?
How my home's value derived in an appraisal?
There are three approaches to value that can be used in an appraisal report. The appraiser selects the option that best reflect the actions of buyers in the market area where the property being appraised is located.
The these options are:
In the significant majority of residential appraisals in our market area (and likely throughout the country), property values are derived solely using the Sales Comparison Appraisal to Value which relies on paired sales analysis. Paired sales analysis is a method of estimating the amount of adjustment for the presence or absence of any feature by pairing the sales prices of otherwise similar properties with and without the feature in question. A sufficient number of sales must be found to allow the appraiser to isolate the effect on value of the pertinent factor (also called paired data set analysis and matched pairs analysis). If applied correctly, all comparable properties in a sales comparison should indicate the same value for the property being appraised.
Why should I order an appraisal before I buy a home?
An appraisal ordered from us provides you with a value opinion from a neutral third party who does not have a stake in the success of your purchase, and who is especially educated and experienced in property valuation, which a Realtor is not. In many instances, Realtors can provide a narrow and reliable value range - but they are often many situations where their techniques fail the test of market value and the buyer spends more than they should, or have to, on a home.
Isn't a mortgage lender going to order an appraisal? Why do I need another one?
Yes, but mortgage lending rules require that the mortgage lender supply a copy of the purchase contract to the appraiser which can influence the appraised value. This is because the Definition of Market Value states that a property is worth what a buyer and seller are willing to agree to. An appraiser with a purchase contract in hand has a signed declaration from a buyer and seller for a particular purchase price. In purchases, it almost becomes a situation where the appraiser is left to prove or disprove the purchase price instead of developing their own value opinion.
It is also important to realize that appraisal the mortgage lender orders is for the mortgage lender to make a lending decision from, and to give them assurances that they will be able to sell/trade your loan on the secondary mortgage market. As such, they often have their own restrictions and requirements imposed on the appraiser / appraisal that can influence the appraisal and its value, sometimes to the detriment of the purchaser.
When should I order the appraisal for a purchase?
It is important to have the appraisal ordered as early in the purchase process as possible. Ideally you would order it before making an offer to purchase a property, but that is not always practical and there are benefits to having a purchase under contract. If you are already under contract, it is important to have an appraisal back from us before you receive one back from your mortgage lender so that the benefits of our appraisal can be maximized. For example, our appraisal can be used to help you exit an above-market purchase price when an appraisal contingency exists in the purchase contract. If the appraisal from the mortgage lender, which is typically influenced by your purchase contract, supports your purchase price, you may not be able to renegotiate the purchase price or exit the purchase because there is contrary evidence.
Are there other benefits to ordering an appraisal before buying a home?
Call us at (508) 995-9079 for additional information.