How Does An Appraisal Work?
The major log jam in today's real estate market is valuation difficulties. Banks are having a hard time confirming the purchase amount meeting up with the actual value of any given home. This causes a bottle neck in the amount of money they can loan out due to processing times being extended. Just to make sure what they are loaning on is worth the amount they are loaning, banks hire appraisers.
In the appraisal the analysis of market data is used to compare properties with similar attributes to establish a price window. This is done so banks do not loan too much money on a property that they cannot get their initial loan amount back if they have to foreclose on it. Otherwise, if the property owner could not or would not pay the bank would be left holding the bag, as in a rapidly depreciating market.
Any can be trained to be an appraiser but there are many certifications for different kinds of appraisers. Most people are familiar with residential real estate, but there are certifications for land appraisers, commercial appraiser and even industrial appraiser as well.
The appraisal has to be a neutral valuation, no matter the certification, so that the best interest of the client, which is the bank, is best served. If this is violated then the appraisal has to be reviewed or thrown out altogether.
In the event that an appraiser can prove that the home is not worth the amount of the purchase, the buyer either has to come up with the difference for a down-payment or cannot get financing for the home. In most cases, the buyer simply would walk away and not complete the transaction. But, without an appraisal the bank can frequently be stuck holding the bag.
Although many home buyers do not like the fact that they are subsidizing the banks investment by paying for an appraisal, there really id not a good way around it. Until we find a better solution for establishing valuations for real estate, we are likely to continue to have to deal with appraisals for a long time.
In the appraisal the analysis of market data is used to compare properties with similar attributes to establish a price window. This is done so banks do not loan too much money on a property that they cannot get their initial loan amount back if they have to foreclose on it. Otherwise, if the property owner could not or would not pay the bank would be left holding the bag, as in a rapidly depreciating market.
Any can be trained to be an appraiser but there are many certifications for different kinds of appraisers. Most people are familiar with residential real estate, but there are certifications for land appraisers, commercial appraiser and even industrial appraiser as well.
The appraisal has to be a neutral valuation, no matter the certification, so that the best interest of the client, which is the bank, is best served. If this is violated then the appraisal has to be reviewed or thrown out altogether.
In the event that an appraiser can prove that the home is not worth the amount of the purchase, the buyer either has to come up with the difference for a down-payment or cannot get financing for the home. In most cases, the buyer simply would walk away and not complete the transaction. But, without an appraisal the bank can frequently be stuck holding the bag.
Although many home buyers do not like the fact that they are subsidizing the banks investment by paying for an appraisal, there really id not a good way around it. Until we find a better solution for establishing valuations for real estate, we are likely to continue to have to deal with appraisals for a long time.
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