When do you need an Appraisal
Every year, countless people in the United States buy, sell or refinance their property. Most, if not all, of these transactions include a simple line item for an appraisal. It has become an understood and accepted part of a real estate transaction. ''Let's bring in the expert and make sure we're not spending too much on this property.''
But is this the only reason to get an appraisal? Are there other times when the services of a certified, licensed, independent real estate professional might come in handy?
Many employees who work for large and small corporations are transferred to another location and many of their companies offer a relocation package that includes a "buyout" of their current home.
In this instance, an appraiser is brought in as an unbiased real estate expert to estimate the most probable selling price for that home. This is a different assignment than most appraisers are experienced in completing. There is no target value as in a purchase that has been established by the buyer and seller. It takes an appraiser who is experienced and knowledgable in establishing what a property will eventually sell for, with the parameters given by the transferring company. Rick Foos, SRA has been completing relocation appraisals for over 20 years and is a member of the Employee Relocation Council and the Relocation Appraisers and Consultants (an association of real estate appraisers specializing in relocation appraisals).
Private Mortgage Insurance or PMI is the supplemental insurance that many lenders ask home buyers to purchase when the amount being loaned is more than 80% of the value of the home. Very often, this additional payment is folded into the monthly mortgage payment and is quickly forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan - whether through market appreciation or principal paydown - dips below this 80% level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met.
Many appraisers offer a specific service for home owners that believe they have met the 80% loan-to-value metric. The appraiser can provide you with a report estimating the home's value. The costs of this service is very often recovered in just a few months of not paying the PMI.
Before someone decides to sell a home, there are several decisions to be made. First and foremost: ''How much should it sell for?'' But first there may be other equally important questions to ask: ''Would it be better to paint the entire house first?'' ''Should I put in that third bathroom?'' ''Should I complete my kitchen remodel?'' Many things which we do to our houses have an effect on their value. Unfortunately, not all of them have an equal effect. While a kitchen remodel may improve the appeal of a home, it may not add nearly enough to the value to justify the expense.
Estate Planning, Liquidation or Divorce
The loss of a loved one is a difficult time in life. Likewise, a divorce can be a particularly traumatic experience. These events are often complicated by difficult decisions regarding the disposition of an estate. Unlike many wealthy individuals, the majority of Americans do not have dedicated estate planners or executors to handle these issues. Also, in most cases, a home or other real property makes up a disproportionate share of the total estate value.
Here too, an appraiser can help. Often the first step in fairly disposing of an estate is to understand its true value. Where property is involved, the appraiser can help determine the true value. At this point, equitable arrangements can more easily be arrived at among disputing parties. Everyone walks away knowing they've received a fair deal.