When you buy or sell a house, the lender involved will require an appraisal. Why do lenders need an appraisal? They need it to verify the home's value, which is a vital aspect of a home loan. Lenders want to know that the home is worth the amount a person is paying before issuing it. To find out, they hire an appraiser to tell them. Here are the factors that an appraiser uses to answer this question for a home sale.
1. The Location of the Home
A home's location plays a significant role in the home's value. If you have two identical houses, they might be worth different values simply because of their locations. A home in a safe, desirable location is worth more than one in a poor area with high crime rates. Therefore, the appraiser will evaluate the area when determining the value of the home.
2. The Size of the Home
The next factor that affects a home's value is the home's size. Smaller homes will not be worth as much as larger homes. Homes with four bedrooms might be worth more than those with three. A home with a basement might be worth more than one without.
3. The Condition, Age, and Features of the Home
Appraisers also carefully review several other things when performing an appraisal. The first thing is the condition of the home. Homes are worth higher values when they are perfect and have no defects compared to fixer-upper homes. Appraisers also look at the age of a home. An older house might not be worth as much as a brand-new home. Finally, the appraiser might factor in the features of the home. For example, your home might be worth more if it contains brand-new systems or high-efficient appliances. The features your home has can add value to it.
4. The Current Real Estate Trends
The final thing that affects a home's assessment is the current real estate trends. The real estate market has highs and lows. When the market is at a high, home prices rise. When the market is at a low, home prices drop. Appraisers know how to evaluate the real estate market to account for its changes and trends, and they factor these things into the final appraisal.
If you are buying or selling, you should expect an appraisal. If you have questions about it, you can talk to a real estate appraiser.