Home appraisal is a crucial part of buying or selling your house. It is an independent process carried out by an accredited home appraiser. The process of appraising tells how much a home is worth. Besides, the process is a visual inspection of the house, it reflects on what the market says about the real estate property. The reason a bank requires an appraisal status is so that it can fix a loan amount to grant you. Local authorities use the appraised value of a home to determine how much tax the owner must pay. The following are reasons why a home does not appraise as expected.
Cost Does not Equal Value
A homeowner who spends a lot of money on the renovation of the house before appraisal or sale may end up having a lower value than expected. For instance, if you spend $60,000 on improvements, there is no guarantee that the cost will be more than $60,000 after valuation.
Inexperienced or bad Appraisers
Lenders utilize the services of appraisal management companies (AMCs) or identify an independent appraiser. A good appraiser is independent and unbiased. Bad appraisers are quick and sloppy. They end up doing a dubious job since they are unfamiliar with the local market nuances. They rush through the job eventually delivering discordant reports. The AMCs may pick a cheaper appraiser from an area outside your market. The picked appraiser will not have real estate experience in your neighborhood. Therefore, the appraiser will carry out a home valuation without a reliable market history of the surrounding.
Radical Property Market
When the prices in an area increase rapidly, it will be hard to incorporate the changes to form a good trend for home selling. It takes about six months for a pattern in home prices to be integrated and reflected in home-selling criteria. While a home seller is expecting to reap the benefits of rapid price increase, the appraiser may not value the home based on un-established price behavior.
Home Priced too High
An agreement between two people does not represent the market opinion. A home seller can make a deal with a specific buyer who is willing to spend extra dollars for what impresses them. Someone can love the neighborhood or have friends within the locality. In this case, they could be willing to pay anything to stay there.
Strict Lending Guidelines
There are tendencies of home appraisals being inflated to meet or match the loan requested. In such a case, banks will label an appraisal suspicious if it comes too high or coincidentally matches the asking price. Professional appraisers who have the mind of lenders will advise home sellers on an appropriate home appraisal value to meet their financial requirements.
In a bid to increase the home value, some home sellers incur excess costs which won’t necessarily affect the appraisal. Quality home valuation does not rely on anyone’s desire. It is the verdict of an experienced and qualified home appraiser that carries the day.