Whether you’re planning to buy or to sell a home in the Lexington, KY area, it is important to establish the correct details surrounding home appraisals. Because both home buyers and sellers have rather infrequent experiences with real estate appraisals, a variety of common misunderstandings exist. An appraiser of real estate, like any other appraiser of items of value, combines general expertise and specific research to develop a educated opinion of the value of a given property. In an effort to clear up a few common misconceptions, we have debunked appraisal myths for you below:
Myth: A clean home will get a better appraisal.
Let’s get this false idea out of the way right at the outset. Appraisers quickly develop the acumen to look past dirty dishes and toys strewn about. However, signs of general neglect can impact an appraisal. Damage to flooring, broken windows, cracked plaster, and non-operating appliances can all lower the valuation ultimately provided by the appraiser.
Myth: Anyone can call themselves an appraiser.
On the contrary, federal law demands that all states establish both minimum standards and licensing practices for appraisers of real estate. Depending on the state, trainees may have to take courses, pass exams, and/or acquire supervised experience.
Myth: The main reason for appraisal is to keep the buyer from paying too much.
Although both the buyer and the seller gain valuable information from the appraisal, the appraiser’s main job is to protect the lender. Lenders are essentially making collateralized loans when they approve mortgages. Lenders know that they are at great risk if they loan significant sums on overpriced properties. Good professional appraisals help to keep this from happening.
Myth: Appraisers use specific formulas to arrive at a home’s value.
In reality, an appraiser must expertly weigh a variety of variables, such as the home’s location, its proximity to valuable facilities like schools, lot size, the overall condition of the home, and the size of the home. Finally, the recent selling prices of comparable properties in a given Lexington neighborhood is also a key factor in the final determination of current property value.
Myth: Appraisers don’t have to tell buyers about defects.
Well, yes and no. If a Federal Housing Administration (FHA) mortgage is involved, the appraiser must disclose potential problems to the buyer. When the FHA insures loans, it has stringent requirements, and this is one of them. However, when non-FHA mortgages are involved, no such requirement exists.
Myth: An appraisal and a home inspection are essentially the same thing.
No; An appraisal establishes an educated opinion about the value of the property specifically for the lender. The home inspection helps to educate a buyer about the condition of the home in a detailed way. A home inspection may uncover issues that require subsequent further negotiations between the buyer and the seller.
Myth: If the valuation comes in lower than the purchase price, the deal is dead.
In reality, the situation is often resolved in one of a number of ways. The seller may reduce the price, the buyer may increase his or her down payment, or an escrow account maybe established to fund repairs that would increase the home’s valuation. Or,some combination of these solutions may be employed. Only on rare occasions will an appraiser reconsider the valuation if new evidence is presented.