| An appraisal is an estimate of
the value of a property, made by a qualified professional,
called an appraiser. An appraisal of the property
you want to purchase is as important as your credit
history in obtaining a mortgage and is a critical
factor in determining how much of a mortgage the
bank or mortgage company will approve. After all,
the property you are purchasing serves as collateral
for the loan
The appraiser generally is chosen by the mortgage
lender, or you can locate a qualified appraiser
by contacting one of the professional organizations,
such as the Appraisal Institute or the American
Society of Appraisers.
You will be refused a mortgage, or offered a
smaller amount on the mortgage, if the appraisal
falls short of the amount you wish to borrow.
You will have to make up the difference with a
larger down payment, or renegotiate the sale price
with the seller.
To avoid this situation, make certain you ask
your Realtor for a Comparative Market Analysis,
also known as a CMA or "comps," before
you buy your dream home. The CMA shows recent
sales of properties in the neighborhood where
you want to buy a home. Not only does it let you
know whether you’re paying a fair price
for the property, but it also can provide a clue
as to the value of your property from an appraiser’s
perspective.
The appraiser looks at your home from two separate
angles to determine its value:
• What it would cost to rebuild the home
• How it compares to other properties of
similar size, quality and location that have sold
recently.
Banks and mortgage companies frequently complain
that some borrowers think their properties are
worth more than they actually are, and then are
disappointed by the loan amount they are approved
for. This situation can be avoided if you ask
for the CMA report before making an offer on the
property.
Tip: You are entitled by federal law to a copy
of the property appraisal, which you may need
to examine closely if the appraisal is low.
What to do if the appraisal is low:
• Obtain a copy of the appraisal report.
• You can ask the lender to override the
estimate or request a new report from another
appraiser.
You can make a case to raise the estimate if
you can show that the appraiser overlooked a significant
feature of the home or failed to consider a recent
sale for a higher price. |
