A Realtor appraisal and a professional, licensed appraisal arranged by your mortgage lender have different purposes in the housing market. In each case, an appraiser prepares an estimate of the value of the home for sale. The results can impact both the list price and the buyer's mortgage.
Realtor is a professional title for a real estate agent who is a paid member of the National Association of Realtors. When you hire a listing agent and brokerage to sell your home, the agent does a basic appraisal to help you figure out the best listing price. She typically compares your property to sale prices of other comparable homes in the area, making allowances for any extras, like a deck or pool, and taking away for any features not available in your home.
The real estate agent's appraisal is part of her service to you as the seller. The goal is to set a reasonable price that gives you the best chance to sell your home for a fair value. With a listing price too high, your home will not appeal as much to buyers in that price range. A price too low may get you a quick sale, but you could leave money on the table.
When you go to a bank or mortgage lender to get financing for your home purchase, your lender typically arranges a professional home appraisal as part of the loan approval process. A state-certified professional home appraiser conducts the appraisal, which includes an inspection of the general condition of the home and documentation of room sizes and features. The appraiser uses a variety of research tools, including the local Multiple Listing Service, court records and prior appraisal data to compare your home to similar ones in the market. He prepares a long form report, detailing all aspects of the appraisal and a short summary that explains the appraised value and reasoning behind it.
A bank appraisal is usually conducted after a purchase contract is in place and the buyer is getting financing to complete the purchase. As a buyer, your bank or mortgage lender basically becomes your co-investor in a home. Because of the risks, the lender includes conditional ownership in your mortgage contract. This means the bank can foreclose, or take possession of the property if you fail to repay your debt. The purpose of the appraisal is to ensure the home is worth the price you paid and the money the lender gives you. Often, these appraisals come in at or near the agreed upon purchase price, unless you drastically overpay, since the true market value is what you as the buyer will pay.
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