Having an appraiser come to your home can be inconvenient. We at Appraisal Precision and Consulting Group, Inc. understand that. We try to make it as non-intrusive as possible, but you may be wondering why you have to have an appraisal to begin with.
Though there are many reasons for an appraisal, most fit into 4 main categories. These are in no particular order.
4 Reasons for an Appraisal:
1. Lending Collateral
The large majority of appraisals are for verification of assets from the bank/lender’s perspective. Whether you are getting an initial mortgage to purchase a home, doing a refinance, or getting a home equity loan, the lending institution wants to know if your home is worth enough to cover their risk should the loan ever go into default. Even if the loan to value ratio is not high (if you are trying to get a home equity loan for a few thousand dollars and your home is worth several hundred thousand dollars), some banks have policies that require an appraisal no matter what the loan amount. Most loans are high enough however, that a full appraisal is necessary to verify the assets you might bring to the table. Most full appraisals require an appraiser to visit the property, do a full walk-through, and take interior and exterior photos.
2. Bank Asset Verification
Every so often, lending institutions do a full inventory of the assets they have on the books. Even if they already have an appraisal on your home, markets change. For a variety of reasons, the bank may want to re-verify the value of your particular home or investment property. Banks will also often re-evaluate your home’s value if you are in default on the loan. This happens long before the foreclosure process begins and may happen without you even knowing (through an exterior drive-by or desktop valuation).
Appraisals are not always ordered by the bank. Sometimes homeowners are curious about the value of their home. Perhaps they are contemplating selling and want to know a good asking price. Maybe they want to refinance (or take cash out) and do not know if they have enough equity to do so. Are you paying Property Mortgage Insurance (PMI) and want to see if you can drop it? It is always nice to know where your property stands in valuation and an appraiser can help you know for sure. Do you think your county property assessment may be too high? An appraiser can tell you if it really is.
4. Specialty Valuation
Appraisals are done for a variety of purposes. Perhaps you gift all or some of your property to charity. The IRS will want to know what it is worth so you can get the tax write-off you might seek. Perhaps there is pending litigation on the property. An appraisal can be used as evidence in a court case. If you are going through a divorce, a valuation of your property by a qualified appraiser may be used to help the judge make a decision on the division of assets. You might have an appraisal done if you had a death in the family and an estate needs settled. The list goes on and on.
It is important that you understand why an appraisal is being ordered on your property. If you do not, or have questions, contact the party who ordered it and ask. They should be able to explain the reason for the appraisal. If there are further questions, feel free to contact Appraisal Precision. We are experts in the appraisal field and will help you in any way possible.