Are you ready to put in your offer on a house? This is an exciting event, for sure, but there might be a lot of things you are wondering about the process. One of the things you might wonder about is how an expert appraises the house you are buying and why this matters so much. An appraisal matters for several reasons, and there are several factors used by experts to determine appraisal values.
Why It Matters
Why does an appraisal matter so much? This is a question that both sellers and buyers wonder, yet there are some good answers for this. For a buyer, it matters because he or she is offering to pay a certain amount for the house. If the house really is not worth this amount, why would he or she pay this much money for it? For a seller, it matters because loans are based on appraisal amounts. If the appraisal is not valued high enough, it could blow the whole deal.
Lenders care a lot about appraisals, too, and they even base loan approvals and amounts on them. A lender will generally loan a certain percentage of money to a person based on the value of the house. If the value is under what it should be, the lender could either deny giving the loan or require more money from the buyer through the down payment.
Appraisals can affect real estate transactions, but they only really affect them when they are too low.
How Experts Determine Appraisal Values
When you hire an appraiser for this purpose, he or she bases the value of a house on the current market. If house prices are really high right now, this can affect the appraisal amount. The same is true for markets when home prices are low. Appraisers rely heavily on recent real estate sales too. They will compare recently sold home prices to the house you are buying or selling. They will then base the home's value on the going rate for houses right now. An appraisal also factors in things such as the condition of the house, updates to it, and energy-efficient features a homeowner recently installed in a house.
Knowing how things like this work can help eliminate some confusion you might experience when buying a home. For more details about appraisals or other aspects of buying a house, talk to a real estate agent.
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