If you own a property, whether it’s your home or an investment property, you may wonder about its true value.
While you can certainly look at similar properties in your area and get an estimate, sometimes you need a more precise answer. That’s where a real estate appraisal comes in.
Appraisals evaluate a property’s worth, considering its condition, location, and other factors. In this blog post, we’ll look at signs indicating you may need a real estate appraisal.
Why or When Should You Consider a Real Estate Appraisal?
A real estate appraisal can help you determine the fair market value of a property, which is crucial for making informed decisions about buying, selling, refinancing, or insuring real estate.
Let’s explore the red flags or instances indicating you need a real estate appraisal.
1. Inheritance or Estate Planning
Inheriting property or estate planning refers to arranging your assets and property to be passed down to your heirs after you pass away.
An accurate property value is crucial because it determines the value of the assets you pass down.
For example, if you have a home that you want to pass down to your heirs, you need to know its current market value.
This information can help you determine how much your heirs will receive and ensure that your wishes are carried out properly.
When should you get an appraisal for inheritance or estate planning purposes?
Getting an appraisal when you’re updating your estate plan or changing your will is a good idea. This ensures that your property is accurately valued and your heirs receive the appropriate amount.
2. Change in Market Condition
Market conditions mean the overall state of the real estate market in your area. This includes supply and demand, interest rates, and economic trends.
These factors can cause fluctuations in property values, which can impact your investment.
For instance, if there’s a sudden increase in demand for homes in your area, the value of your property could go up.
On the other hand, if interest rates rise, this could cause a decrease in demand, and property values could decrease. Therefore, staying aware of these changes is important, as they could affect your investment.
If you notice a change in market conditions that could impact the value of your property, it might be a good time to get an appraisal.
3. Planning to Sell or Refinance Property
When you sell your property, you want to get the best price possible, right?
When refinancing, you want to ensure you’re not taking out more money than your property is worth.
An appraisal can help with that! It provides an accurate estimate of your property’s value, which can help you determine the right price.
For example, if you’re selling your home, an appraisal can help you set a fair asking price that aligns with the current market conditions. This can help you attract potential buyers and make a successful sale.
Similarly, if you’re refinancing your property, an appraisal can help you determine the equity you have in your home.
It can impact the interest rate you receive on your loan and the amount of money you can borrow.
4. Property Damage or Renovations
If your property has suffered damage due to a natural disaster, fire, or other unforeseen events, it’s important to get an appraisal.
It’ll help you determine the extent of the damage and the cost of repairs or replacements. It can also help with insurance claims and ensure you’re properly compensated.
Also, while home improvement adds the most value to your property, getting an appraisal before and after the renovations is important.
It will help you decide if the renovations will be worth the increase in property value; sometimes, it may be more profitable to buy a new house altogether.
It can also help you set a fair asking price if you plan to sell your property in the future.
A free tip: You should get an appraisal as soon as possible after the damage occurs or before you begin renovations. That way, you can accurately assess your property’s value and decide which renovations are important and which are not.
5. Property Tax Assessment
A property tax assessment is a process where your local government determines the value of your property to calculate the amount of property tax you owe.
The value of your property is a crucial factor in this process, as it directly affects the amount of tax you’re required to pay.
If your property is overvalued, you may pay more in property taxes than you should. In such cases, you can challenge the property tax assessment after an appraisal and provide evidence to support a lower value.
However, you must have an accurate property value to challenge the assessment. An appraisal can help you determine the actual value of your property and challenge the property tax assessment.
6. Claiming Bankruptcy
Finally, let’s learn about a rare time you may need a real estate appraisal.
When you file for bankruptcy, you have to tell the court how much money you have, how much you owe, and other financial things.
If you own a house, you might be worried about what will happen to it. This is where a home appraisal can help.
There are two types of bankruptcy. One is when you plan to pay back what you owe, and the other is when you sell everything you own to pay your debts, including your house.
To know if you can keep your house in bankruptcy, you must know how much it is worth. If the value of your house is less than the amount of protection for homes that you can get, then you get to keep your house.
In such legal cases, hiring someone who knows what they’re doing and is licensed by the state is important. If the appraisal is wrong, the judge might not accept it, and you might not get to keep your house.
How to Choose the Right Real Estate Appraiser
Finding the right person for the job is important when you need a real estate appraiser. You should ask them questions and check their qualifications before hiring them.
Look for someone who has experience appraising your type of property and knows your area well. Real estate agents can recommend good appraisers.
Make sure the appraiser is licensed by the state. There are three different types of licenses they can have –
- Trainee
- State Certified Residential
- State Certified General
Ask which one they have.
Ask the appraiser how they calculate the value of a home. For example, they might use a database of recent home sales or information from the Multiple Listing Service.
Find out who will do the inspection and write the report. Sometimes, even if you request an appraiser with a State-Certified Residential or General License, the person assigned to appraise your property may have a different license.
Consider consulting a property lawyer for expert guidance during various real estate scenarios, including inheritance planning, market changes, property transactions, renovations, property tax assessments, and bankruptcy proceedings. Their legal expertise ensures smooth and legally sound processes in these situations.
Where to Find a Reputable Appraiser?
You can search for appraisers on the National Registry of appraisers maintained by the Appraisal Subcommittee by their state, city, county, name, or license number.
Professional trade associations like the Appraisal Institute also have lists of qualified appraisers in your area.
A local real estate agent or lender can recommend a good appraiser too. You can also read reviews and ratings of appraisers on websites like Angi or Yelp to see what other people think about their work.
How Much Does a Home Appraisal Cost?
The price of a real estate appraisal changes based on a few different things, like how big the property is, where it is located, and how complicated the appraisal is.
Usually, a single-family home appraisal costs around $300 to $450, but it can vary based on the property size.
For instance, a 1200 sq ft home appraisal can cost $250 to $350, while a 2500 sq ft home appraisal can cost $500 to $600.
Also, an appraisal in New York city won’t cost you the same as a house in rural Oklahoma.
Nonetheless, some appraisals can cost anywhere from $600 to $2,000. On average, a home appraisal costs around $425.
How Do Real Estate Appraisers Measure a Property’s Value?
Appraisers use various methods to determine a property’s value, such as looking at comparable sales, the home’s location, and the neighborhood, researching rental leases, land, and new construction costs.
During an appraisal inspection, appraisers check the inside and outside of the home to ensure it is in good condition and safe, and note the number of rooms.
They also consider other factors that can affect a home’s value, such as its location or any unique features it may have.
The local market also affects the appraisal because a home’s value is based on the value of similar homes in the area.
If the appraisal is lower than the contract price during a home purchase, it can delay or cancel the transaction. If you’re selling a home with a low appraisal, you may need to lower your asking price. Even if buyers have cash, they don’t want to pay more than a home’s value.
Conclusion
A real estate appraisal is an essential tool for protecting your investment. By getting an appraisal, you can determine the current value of your property and ensure that you’re getting a fair deal when selling or refinancing.
So, if you’re considering a real estate transaction or just want to make sure you’re getting the most out of your property, don’t hesitate to get an appraisal. It’s an investment that can pay off in the long run!
