The appraisal process for any mortgage loan is much more complicated than most people realize. In order to determine a property’s value, an appraiser is hired as an independent contractor and represents a non-biased third party opinion.
The appraiser must not only review your property (known as the subject property), but also at least three “comparable” properties in order to determine “Fair Market Value” for your home.
The appraisal takes into consideration several factors in determining the fair market value of any property. These factors include, but are not limited to:
- The neighborhood
- Age of the home
- Number of rooms
- Type of construction
- Overall square footage
- Lot size
- Maintenance and upkeep
Other factors that affect value include the number of rental properties that may be in your neighborhood, and if the house is overbuilt or under built for your area.
Finally, the appraiser must check sales reports for the past 6 months to determine what homes have been selling for in your area. Actual sales data is used in determining value, not listing or asking prices.
One common misconception is that an appraisal report will be given to the county appraisers office. This is not true. An appraisal report is completely confidential and is not shared with any government agency. In fact, in a sales transaction, it is not even shared with the seller.
How much does an appraisal cost? Ask your credit union mortgage loan representative for current pricing.
Types of Appraisals
Depending upon the type of loan you are requesting, your credit union may use any one of a variety of appraisal reports.
A full walk-through inspection report is used when a lender is required to view the interior of any property. If there is any question concerning damages or modeling renovations, this type of report may be utilized.
For home equity loans and home equity lines of credit, however, most credit unions use computer-generated Automated Valuation Models (AVM’s) and public record data bases to compile valuation data. Additionally, a drive-by report can be used when an interior inspection is not required.
In most cases, the appraisal must be paid in full before your closing. Be sure that you check with your credit union about the cost of your appraisal.
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