Appraisal is simply an estimation of value. A licensed appraiser will evaluate the property and give his or her opinion about the property condition performs it. Although, it may be similar to inspection but there is a big difference. The main goal of this activity is to give a justified opinion about the property value. They need this because it can help in various decision-makings. For example, the seller can use this as a basis for pricing. The buyer can use this to know how much to offer. Lenders need this to know how much money to credit to their borrowers. It has also uses for other purpose like taxation and many others.

However, one must fully understand home appraisal. This can help you determine the factors that will be taken into consideration in determining the appraised value. These factors could either increase or decrease it.

So of you want to know the important ones, check out below:

1. The type of house- it could be identified as one story, two-story, split-level, factory-built.
2. Features of the home (including design)- The materials used and the kind of structure present and how they were built.
3. Improvements made in the property- new components of the house are identified and described.
4. Comparables- Just like in the CMA, several comparables will be listed and will also be described using the same factors.
5. Sale with involvement of financing
6. Location- The kind of neighborhood is identified. Any zoning areas are will be considered as well as its proximity to other establishments.
7. Age of Property
8. Size
9. Depreciation

The value of the property can be identified using 2 approaches. It could be through sales and cost approach. In sales comparison approach, the appraiser draws the value of the property simply by identifying comparables within the area. He or she would compare the features of a home including lot size.

As for cost approach, the appraiser draws the value of the property by looking into the value of the land, the depreciation, the overall value of the property and the cost of replacing them upon destruction.

After the appraiser has performed the appraisal, he or she would have to create a report stating the following things:

- The method used for determining the value.
- A description of the property including its size, condition and other features.
- Any problems related to its structure.
- A description of the location.
- The comparables used
- The intended use of appraisal
- Certification
- Limiting conditions.

When you seek appraisal services, make sure you hire a good appraiser. He or she must be certified or licensed. Hiring someone with these credentials would mean they are able to perform their job according to the standards set by the accredited appraiser organization in the country (USPAP). But this is not all that defines competency in the field of appraising. Your appraiser must have enough experience. He or she should have appraised various properties within the area.

The two best option one can choose when estimating the value of the house is to either go to an experienced realtor who does know about the area and property one lives or go to the free websites where one has to provide the basic answers to the questions asked like the street address, area, bathrooms and bedrooms. After the information provided an estimate value of the property will be calculated.

Buying and selling of the house

When selling a house the listing price should be lower than the appraisal price as this will attract lots of buyers and there will be multiple offers if the house is in a good condition and this might drive up the actual price estimated.

But when buying a house one should not base the price of the property on the listing price but should be based on the value of the property on the other hand if the listing price is lower than the value of the home then it is a good deal to have.

Methods of estimated house appraisal

To buy or sell the existing house one should always get information on the estimate value of the property and then decision made as this will get one a good deal of the property. There are different methods of home appraisal estimate which is useful when making a good deal of the house. We can also get free estimate of the house online without any hassle.

If one is planning to buy a home then one will have to get a professional appraisal in order to get a loan for the house. A professional house appraisal will come to the house to conduct a survey of the house where he will be taking a few hours in taking measurements and pictures of the house to compare it with the sales of the home in the area. The service provided can cost a person to about two hundred to four hundred dollars.

Another method to get an estimate of the house for free is to go to an experienced agent who knows about the area and is able to give an accurate detail of the estimate. One should take advice from at least three agents to get a fair picture of the estimate.

Another method is going online and providing basic information and the estimate is for free and accurate based on the public sales records.

Unfortunately, this problem of low house appraisals is occurring across the country. Homeowners who purchased several years ago are often being told that their homes have fallen in value and that the appraisals on them are insufficient for the lender to make a new loan. This is happening even in cases where you may already have a loan with the mortgage lender you are trying to refinance with.

Since there are few sources of mortgage news that really explain to a homeowner what an appraiser does when he determines a value for your home, I have prepared this "nutshell" version. I have also explained one of the major reasons why appraised values are currently much lower than only a few years ago. The actual reasons for a low appraisal may be much more complex, but this is usually the primary culprit.

When the appraiser looks at your house, it is his job to estimate the probable selling price on the date that he views the property. The main factor that determines the probable selling price of your house is the real estate market in the area where the house is located. If the area has many repossessed homes that are actively "for sale," it may drive down the probable selling price of your home.

How? It is a matter of simple economics. The appraiser looks at what your house would need to be priced at to compete with all of the homes that are "for sale" in your neighborhood. There are only so many buyers who are willing to buy in any individual neighborhood, and when two homes offer the same features, buyers will usually go with the lower priced choice. This is the same principle that shoppers use when comparing two boxes of crackers at the grocery store. If both brands taste nearly identical, but one brand offers 50 more crackers or is 50 cents cheaper, shoppers will usually choose the better price or value.

The problem for house appraisals comes in because, often, banks sell their repossessed homes at below market value in order to liquidate those assets faster and raise capital to make new, hopefully more stable, loans. So, if your neighborhood has a lot of repossessed homes being sold, they may pull down the market value of your own home when the appraisal is done for the mortgage refinance company. This happens because in order to compete with these lower priced homes, private homeowners are forced to reduce the prices they ask for their own homes. This in turn creates a pool of low priced privately owned homes that your house would have to compete with in order to sell.

While it is important for the appraiser to know what you paid for the house, the current appraisal must be based on the sales prices of homes that have sold in the last 90 days to 6 months. So, if you bought your home 3 years ago, the price you paid then may have very little do with the price you could get out of it now.

Likewise, it is okay to tell the appraiser what you think your home might be worth, but don’t expect him to necessarily agree with you. The question the appraiser is trying to answer for the mortgage refinance company is not what you think your home is worth, or what you think you would like to sell it for, or even how much you have invested. The question is "What would this home need to be priced at in order to sell in a reasonable time, all things being equal?"

Don’t worry – this isn’t a test of how clean you keep your house or even if your house has problems (that will be for the home inspector to find out). The appraiser is there to determine a fair market value for your home. Whether you are selling the house or refinancing, this is a common part of the process and the inspector is quite used to traipsing about peoples homes in all kinds of disarray so you need not be embarrassed if your house is messy and it will not affect the value the appraiser puts on the property.

Determining the market value of your home is necessary so that your lender knows the home is valued at or above the amount of money you are borrowing. An appraisal is an estimate of worth. It is an opinion but is not entirely a subjective process. The FNMA, Federal National Mortgage Association sets up the guidelines and assigns values to certain assets of your home to ensure a fair sale.

The value of your home will be determined by comparing it to similar area properties that have sold in the past few months. The appraiser looks for properties that have the same number of bedrooms, baths, square footage and amenities like a fireplace or garage in your neighborhood or town. They start by looking at your neighborhood to find comparable sales or properties in similar neighborhoods that share similar characteristics of lifestyles, income level of residents, surroundings, average age and home values. A valid appraisal can be done when 3 or more properties similar to your own have been found.

Once the appraiser has these homes, there will be some adjustments made to take into consideration features that your home has the others don’t or features they have that you don’t. These features have nothing to do with your décor – they are based solely on house size, rooms and amenities so your hot pink kitchen will not affect the value of your home appraisal!

The process is quite methodical and done to standard practices so you need not worry. If you are moving and you have hired a realtor, you will find the appraisal will come in right on the button for what they have valued your home at. Most realtors know the market quite well so you needn’t worry that your buyer won’t be able to secure funding because of your home appraisal.

When you’re getting a Houston TX Mortgage you will find that you will also need an appraisal. Pretty much any loan program whether you’re purchasing or refinancing requires it. Since this is the normal course of doing business many people don’t ask about this requirement, but they SHOULD!

Over a year ago Fannie Mae and Freddie Mac required lenders to order the appraisal through an independent process that is separate from any interested party. What this means for most lenders is they end up going through a Third Party Vendor who hires an appraiser based on a certain set of requirements. This all sounds good in theory but in practice it’s been bad for the consumer.

Where these requirements fall short is with the Third Party Vendor. They typically hire appraiser for less than half of the actual appraisal fee and expect the appraiser to give 100% of their time and energy on the appraisal. Most of the seasoned and highly experienced appraisers can’t afford to take on the same work for half the pay so the Third Party Vendors usually hire new and inexperienced appraisers for the job. Sometimes the appraisers are hired for a job in an area they have no knowledge of. These issues typically culminate into poor appraisals and values that are not consistent or correct for the home being appraised.

When the appraisal is challenged for value or any other issues the lender must navigate a large bureaucratic system with lots of red tape that can cause a buyer to lose the home of their dreams.

So what should a person getting a Houston Mortgage ask about the appraisal process? First, does the lender you’re thinking of using order their appraisal through a Third Party Vendor or do they order it through an internal group that is independent as required by the Home Valuation Code of Conduct (aka HVCC)? If the lender uses a Third Party Vendor, ask if your full appraisal cost is being given to the appraiser and if it isn’t, how much is given to the appraiser? Remember, you usually get what you pay for! Since most lenders use a Third Party Vendor you will not know where the appraiser is coming from to do the appraisal on the home your wanting to purchase and you will not have the opportunity to know the experience of the appraiser.

If the lender is providing you with a Houston Mortgage uses an internal group that is HVCC compliant you should ask about their appraisers’ knowledge of the area and experience. The lender should have no problem with providing you this information and the credentials of each of the appraisers. Just understand the lender doing your Houston TX Mortgage will not have the ability to pick the actual appraiser who will be appraising your future home.

As a Houston TX Mortgage Lender, we order our appraisals through an internal group that is independent as required by HVCC. Our appraisers are geographically assigned based on their typical service area and receive 100% of the appraisal fee you pay. All of our appraisers have worked with us for years and we are comfortable with any of them completing your appraisal.

If your shopping around and don’t hear an answer that resembles ours, you should keep shopping! Appraisal fees are typically over $400.00 and when you add up other fees you typically have during the purchase process such as inspections, earnest money, credit report, etc… you could be sourly disappointed right before you were SUPPOSED to close. Not to mention… lighter in the wallet.

So, after careful consideration of the time, expense, and energy involved in selling your own home, you have decided to go the For Sale By Owner route. You have taken care of all necessary inspections and legalities, you are ready to plant a sign on your front lawn and place an ad in the paper. Before you take these steps to attract potential buyers, of course, you will need to know the value of your home. This will help you to finalize the proper sale price, one that accurately reflects the condition of the property and surrounding neighborhood, one that will attract buyers to make bids.

To help determine the sale price, a property appraisal agent is needed for assistance. One thing to note when your home is appraised: the resulting suggested sale price is derived from several points of interest. You might think the price of a home is determined by its age and livable condition (to be certain, those are important factors), but oftentimes an appraiser looks at more than the house. Sometimes he will look beyond the actual building.

Here are just a few factors taken into consideration when a house is appraised. Consider all of the criteria before you delve into selling.

The Overall Market – Is it a "buyer’s market" or a "seller’s market" right now? During a "buyer’s market" period, people looking for homes have the advantage. There will be many homes available, and prices will be competitive. A "seller’s market" is more advantageous, naturally, for the seller. With fewer homes on the market, a seller has more leverage to negotiate a higher price to many buyers bidding for the property.

Location – The old adage of real estate always rings true. Location, location, location! Is your home in a desirable, low-crime neighborhood? Is development booming? Are you near good schools and hospitals? Are you near the ocean, the mountains, the Interstate, or within walking distance to a busy downtown? When you look out the windows, what do you see: the beach, the desert, busy roads, or the city dump? The appraiser takes all of these into consideration to determine a fair price.

Design – With some houses, you can automatically tell when they were built. Like fashion and fads, construction styles change over time. Once upon a time split-level homes were all the rage, while in recent years you may notice subdivisions comprised of attached single-family homes. In certain neighborhoods, you will also detect a pattern, with a particular style repeated every three or so houses. An appraiser will look at the way your house looks when making a price determination. Is it a style of home that will appeal to today’s buyer? Is the color scheme attractive? Do you use vinyl siding? Will a buyer look at your house and say, "It’s perfect!"

Quality of Construction – What is the foundation of your home: brick, concrete, or wood? Are there leaks? Is the roof sturdy? Has anything been added to the building, or remodeled? When an appraiser looks at your home, he will note the sturdiness and potential of the home to determine if one should pay more for it.

Age and Overall Condition – When it comes to certain houses, age may be an advantage. In an historic district, for example, an owner of a hundred-year-old townhome may be able to attract buyers interested in vintage real estate. More so if the house has been cared for very well all this time. Regardless of the age of your home, a property inspector will note wear and tear and overall condition when making a final price.

Rooms – How many rooms does your house have? How many bedrooms, bathrooms? What space is designated for living and recreation? Is there an all-purpose room? These days, people with family tend to drift toward larger houses with such space, while a couple in retirement may want something smaller. What you have to offer a potential buyer will determine for how much the house should sell.

Square Footage – How big is the house? One-story or two? Of the square footage, how much is usable, living space as opposed to space taken up in construction? These days certain people crave more space and may be willing to pay more for it. An appraiser can help determine if your house is worth that price?

Storage – Does your home have an attic, basement, or both? If yes, are they completed and do they provide livable space? Are they divided into rooms? How big is your closet space? The type of storage and amount you offer can be a factor in a high appraisal of your property.

Heating and Air – Does your home have central air or must you rely on window units to keep cool? Is your home heated by electric, gas, or oil? How your home is heated and cooled can be a factor in determining the price of your home. Will a buyer want to pay more for a home knowing he has to install AC and change out gas heat he doesn’t want? These are things to consider.

Parking – Is there a garage? One-car, two-car, attached or detached? Is there a carport? If you live in an urban area, does your home or condo come with its own parking space? This type of convenience (or inconvenience) is looked at often when appraising home values.
Amenities – Do you have a pool? A Jacuzzi? Skylights and ceiling fans that convey? If you’re on the water, do you have deep-water access and a boat slip? Is your home equipped with an elevator for elderly residents, or a high-tech security system? The more luxuries are attached to a home, the more value can be given.

Financial Considerations – Have any other homes in your neighborhood sold recently? For how much? Are you in current financial straits, that you need to sell quickly? Various financial factors can play a role in a final value, so be sure to go over these items with the property appraiser.

From the inside out, no door is left unopened when your home is appraised for sale value. Before you sell, take the time to know what is to be considered before you arrive at a final sale price to offer potential buyers.