The value of a real estate appraiser
When you are buying a home, refinancing your mortgage, or selling your home, there are a number of professionals that you will work with to help facilitate the transaction. In this five-part blog series, we examine the role of the professionals you may encounter in your home buying and/or selling journey to give you a better understanding of the value they bring to the transaction.
In this post, part two of the series, we’ll discuss the role of a real estate appraiser in the process of buying and selling a home.
What is a real estate appraiser?
A real estate appraiser is a professional who will provide an expert, unbiased opinion on the value of the property for financing purposes. They may also be engaged in consulting for reserve fund planning for large-scale projects, such as those undertaken by condo corporations. It generally takes anywhere from two-to-four years of study and working under a supervising appraiser before writing a final exam to become an appraiser.
How does a home appraisal work?
A number of factors can affect the final valuation that is assigned during an appraisal. An appraisal report is based on a visual inspection of the property. Although not previously acceptable by lenders, under present social distancing guidelines, this visual inspection is now often completed using Google Maps footage and photographs of the interior that the appraiser requests from the home buyer or seller.
In addition to the visual inspection, recent sales of comparable homes and physical details of the property like lot size and square footage will also be considered when assessing the home’s value. Usually, the fee for an appraisal, which can cost up to $500, is paid for by the party applying for a mortgage. However, though the borrower pays the fee, because the lender is listed on the appraisal and orders the appraisal on the borrower’s behalf, the appraisal report is generally requested and owned by the lender.
Why is a professional home appraisal required for a mortgage?
When you apply for a mortgage, your home secures the loan. Usually, the lender will only lend up to a specified percentage of the home’s value, known as the loan-to-value (LTV) ratio. To determine how much they can lend, they need an unbiased value of the property. It’s an outside perspective on the value of a home that can help protect the parties in the real estate transaction process. In many cases, a home appraisal is simply one of the items on the checklist when closing a sale, but there are cases when the mortgage amount and the appraised value do not align. In this case, your real estate agent or your mortgage broker may be able to help you explore alternative mortgage solutions.
Whether you’re buying, selling, or refinancing a home, taking the time to learn more about the people and companies you can expect to work with can help you feel more confident about the process. Be sure to visit the rest of the posts in our five-part series on real estate industry professional disciplines.
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