A Guide to Understanding a Residential Appraisal

Residential AppraisalIf you are purchasing a home, part of the financing process is obtaining an appraisal. Buyers sometimes confuse this with an inspection, which is different.

An inspection is an opinion of condition. It may be required by the city at the seller's expnse or performed at the request of the buyer at the buyer's expense.

An appraisal is an opinion of value. If the buyer is financing the purchase, an independent appraisal is required and ordered by the lender… at the expense of the buyer. The lender uses the appraisal to document that the property has sufficient value to act as collateral for the loan requested.

The appraiser typically examines both the site and any buildings on the site to comparable properties that have sold recently. Adjustments are made to account for differences and come up with an adjusted sale price for the property being appraised.

Appraisals are not an exact science… but rather an informed opinion that can result in different values by different appraisers. If you feel a correction is needed to an appraisal you can ask for a reconsideration of value, but that does not necessarily mean any changes will be made.

Appraisals are more difficult now as market prices are increasing but there are few valid comparable properties as we are coming out of winter season when prices are lower and sales are fewer… and last year's sales were lower. 

Lenders are cautious about values even as prices are increasing, which can sometimes result in disappointments for both buyers and sellers. Be careful not to raise price above list price solely to cover buyer closing costs. This was common before the crash and artifically inflated prices. It raises a red flag for appraisals now.

For more information on the appraisal process download a free copy of A GUIDE TO UNDERSTANDING RESIDENTIAL APPRAISAL from The Appraisal Foundation.

 Sharlene Hensrud, RE/MAX Results – Minneapolis-St. Paul Realtor


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I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

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