A fundamental aspect of making a purchase is getting an appraisal on a home. You should not put too much stock in appraisals no matter how helpful they are.
Why You Should Never Rely Excessively on Appraisals
An appraisal refers to the valuation of a property by an independent appraiser. Aside from doing an evaluation of the home, the appraiser also considers the home in comparison to others of comparable type and so on. A written appraisal of the value of the home is what the appraiser will then issue once completed. Many homebuyers make the assumption the appraisal is the true value of the home both now and in the future. Chances are this assumption is dangerous.
First thing you should know is that the appraisals are limited by what is known as a moment in time. This means that if an appraisal were done today, in a month or two it may not be entirely relevant. The appraisal may not reflect a slowing market if a property has been on the market for a few months. The appraised value being actually higher than the current market will be supporting is what this really means. Homebuyers run into problems when this occurs because they put too much value on the appraisal. Listing the home below and then appraising the amount is what a seller will often do and the homebuyers will think that they are getting a deal. In reality, they may actually be paying more than a new appraisal would support which means that they are not getting a deal. If the appraisal is older, then less value should be put into it.
Most homebuyers assume an appraiser inspects the home for defects and discounts the value of the home accordingly. However, this is not the case. An appraiser is not really doing a critical home inspection. As a matter of fact, usually containing a long disclaimer whereby the appraiser covers his derriere by noting he assumes the property is in good condition and isn't liable if it is not is the appraiser contract and report. That should scare you, obviously. Of course, this is a reason why you need to insist on a home inspection for any property you make an offer on.
A solid part of the equation is an appraisal when you are considering a home purchase. But it is not considered as the piece de resistance when valuing the property.
Why You Should Never Rely Excessively on Appraisals
An appraisal refers to the valuation of a property by an independent appraiser. Aside from doing an evaluation of the home, the appraiser also considers the home in comparison to others of comparable type and so on. A written appraisal of the value of the home is what the appraiser will then issue once completed. Many homebuyers make the assumption the appraisal is the true value of the home both now and in the future. Chances are this assumption is dangerous.
First thing you should know is that the appraisals are limited by what is known as a moment in time. This means that if an appraisal were done today, in a month or two it may not be entirely relevant. The appraisal may not reflect a slowing market if a property has been on the market for a few months. The appraised value being actually higher than the current market will be supporting is what this really means. Homebuyers run into problems when this occurs because they put too much value on the appraisal. Listing the home below and then appraising the amount is what a seller will often do and the homebuyers will think that they are getting a deal. In reality, they may actually be paying more than a new appraisal would support which means that they are not getting a deal. If the appraisal is older, then less value should be put into it.
Most homebuyers assume an appraiser inspects the home for defects and discounts the value of the home accordingly. However, this is not the case. An appraiser is not really doing a critical home inspection. As a matter of fact, usually containing a long disclaimer whereby the appraiser covers his derriere by noting he assumes the property is in good condition and isn't liable if it is not is the appraiser contract and report. That should scare you, obviously. Of course, this is a reason why you need to insist on a home inspection for any property you make an offer on.
A solid part of the equation is an appraisal when you are considering a home purchase. But it is not considered as the piece de resistance when valuing the property.
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