When you apply for a mortgage loan, typically, the lender is going to need to know the property value to determine if the home is appropriate collateral and if the amount the borrower is requesting makes sense. (For instance, Visio Lending has a minimum property value of $75k.) An accurate, unbiased report of a home value (an appraisal) also ensures a fair transaction between the buyer and seller. To further understand the necessity of appraisals and how they are the most trustworthy method for assessing property value, it is important to understand the key elements of the appraisal and how property value is determined. Ordered by your lender to maintain fairness, an appraisal is completed by a licensed appraiser. Here are the elements of a credible appraisal report:
- A clear, accurate description of the property: Appraisers usually visit the property to inspect the interior and exterior, take measurements, and note any completed updates or improvements, as well as any other relevant comments.
- Recent and comparable sales: Appraisers compare the property to similar properties in the same area to gauge recent market values.
- An opinion of value based on researched data: Appraisers use all the data they have collected on the subject property and researched data including listings of other properties, sales, and leases, to draw a fair, reasonable opinion of value.
We know the concept of appraisals can be quite confusing, and we are here to help. Plus, there are ample great resources available. For more on appraisals, we like The Appraisal Foundation’s Guide to Understanding Residential Appraisals. For other educational resources and materials, visit our Resources Page.