According to the National Association of REALTORS, 2023 saw more than 4 million existing home sales, not including the sale of new properties. With each sale comes the necessity of real estate appraisals for residential and commercial use.
These appraisals protect buyers and sellers and typically take between 20 minutes and three hours to complete. This relatively quick property valuation is required by lenders before providing clients with a mortgage on their home.
Wondering why real estate appraisals are beneficial? Let's take a look.
Understanding Real Estate Appraisals
Real estate appraisals evaluate property value. These appraisals are conducted by a professional appraiser for residential and commercial property use.
There are typically three uses for a real estate appraisal:
- Mortgages
- Buying and selling a property
- Tax assessments
An appraiser considers the local market activity when appraising a property. This includes comparable properties with similar market values.
Once an appraiser gathers all the necessary information, they can determine a property's fair market value. This helps sellers stay competitive when listing a property and keeps buyers informed.
Pre-Appraisals for Sellers
Homeowners should consider a pre-listing appraisal to keep their homes competitively priced. The more competitively priced a property is, the faster it will sell.
When property is priced right, buyers feel more confident in purchasing because sellers did their research and set fair prices.
Refinancing and Property Valuation
When property owners replace existing mortgages with more favorable ones, it's called refinancing. Sometimes property owners do this to get a better interest rate or to reduce their monthly payments. Before refinancing a home, mortgage companies may require a professional appraisal to assess the property.
Lenders do this to ensure the new mortgage reflects the price the property is worth.
Home Equity Line of Credit (HELOC) and Other Loans
A Home Equity Line of Credit (HELOC) are loans that borrow from a home's existing equity. These loans are ideal for paying off high-interest debt or making large repairs or renovations to a house, such as an addition.
HELOC loans aren't automatically approved - if a house decreases in value, a loan might be denied. This is why property valuation is so important. It shows a bank the current value of a property as they decide whether to approve a HELOC application.
Besides a HELOC, homeowners can use their property as collateral for other loans. This might be a business loan, for example. In this situation, the bank needs proof that sufficient funds back the loan, and an appraiser is often the proof they require.
Tax Assessments
Taxes are commonly based on a property's fair market value. When property owners suspect their taxes are too high for the area, assessments may be appealed.
The best way to appeal an assessment is with a real estate market analysis appraisal. Just be sure to check that each municipality accepts independent appraisals for tax assessment appeals.
The Importance of the Home Appraisal Process
Real estate appraisals can help property owners as they challenge tax assessments, set competitive prices for selling, and secure a variety of loans. The home appraisal process is necessary for determining interest rates and can protect your investment.
Boston Property Management offers a combination of real estate brokerage services and professional property management for residential and commercial property owners with unparalleled customer service. Receive a free rental analysis today.
