Home Refinancing Procedure: Appraisal

The Appraisal Process and Your Home Mortgage Refinancing Loan

An appraisal is when your lender will ask you to order to determine the value of your house based on the highest and best use of your property (which means use of your land that brings this highest value). Besides this, the appraiser will also place a worth on the market value, quick sale value, and other considerations appropriate to a mortgage.

Understanding Your Appraiser

An appraiser must be licensed and certified in order to appraise properties professionally. The education and qualifications are set by a foundation, and its board (Uniform Standard of Professional Appraisal Practice) determines minimum standards of reporting. Unfortunately, this hasn’t stopped scams and inflated prices from developing nationwide. At times an appraiser is called and asked to make a property match a certain value. If she says no, as she should, after a while she no longer has any business.

Market Trends, Appraisals and Your Home Mortgage Refinancing Loan

These trends will gradually lead to homeowners having the bottoms fall out of their real estate values and leave them with more debt than their houses are worth. This doesn’t just happen when a homeowner sells or buys, it happens during refinance as well. Make sure your appraiser does a fair valuation and is a member in good standing of the professional appraisal boards both locally and nationally. If you think the appraisal is off, it’s in your best interest to speak up—you don’t want to refinance $300,000 of a property that is only worth $250,000.

Approaches to Appraising Real Estate

There are several approaches to appraisal, but only a few apply to residential real estate. One is the cost approach, which is basically the value of the land plus depreciated values of the improvements. The appraiser can also use the sales comparison approach. Here, she will look at similar properties in your area that have recently sold, and determine a price (usually per square foot).

The Final Result

So you can see the value of the appraisal to both the lender and to you. The appraiser may find that your property has, indeed, gain value in a fair manner. So much the better for you! The lenders also need to know that if they agree to a mortgage or refinance for a certain amount, the value will be there if you default. Remember that inflated home prices can be a nightmare for all involved, especially the borrower. Don’t be left hanging with more mortgage than house—insist on a fair valuation of your home by appraisers.