What Is An Appraised Value?
The meaning of appraised value is the evaluation of a property by a professional appraiser at the time of a mortgage origination process. The financing institution usually chooses the appraiser but the homebuyer pays the appraiser’s fee. While the appraised value is determined by the appraiser’s evaluation of the property and it is based on various factors including the market value in the area, it is one opinion of that property’s value. This is why an appraised value doesn’t always equal the property’s market value. The appraiser gives their best estimate of the value of a property based on a variety of factors, but they are not always correct. To determine the accuracy of an appraiser in regards to the market value of a property, an assessment ratio calculation can be done.
Why use the Appraisal Value?
When taking out a loan or mortgage for a house, the lender needs to determine whether the loan they would give the buyer is of high or low risk. The calculation they use to determine this is the Loan-to-Value Ratio (LTV) and they use it also to determine if the borrower needs to buy private mortgage insurance (PMI). Usually with the LTV is below 80%, the borrower does not need a PMI.
The appraisal value also helps the financing institution to establish interest rates for the borrower. By using the same LTV ratio, the value, as mentioned above, tells the lender how high the risk of the loan is. If the risk is higher, the interest rates will be higher and vice versa.
Appraisal Value in Real Estate?
There are several factors that can influence the appraisal value of real estate properties. The property’s curb appeal, issues that weren’t addressed by the owner, prices of neighboring houses, and crime rates can all affect how an appraiser evaluates a property. Some of these factors can improve the property’s appraisal value while others can diminish it. It all depends on how the property is seen in comparison to other properties in the area. Proximity to a cemetery or living near a highway, and broken blinds can have a big impact on the appraisal value but there are ways in which an owner can improve it.
Improving Appraisal Value
The appraisal value can be improved by a homeowner, especially before selling the property. There are many ways to add value to a property, some that require more investment than others but an appraiser will notice a deck or patio in the backyard, a new heating or ventilation system, or smart controls for appliances, security, and lighting. The garage could be extended and the kitchen and bathrooms could do with a make-over. If you’re looking for ways to improve the appraisal value of your home, permanent upgrades go a long way to improve its value.
Popular Real Estate Questions
Popular Real Estate Glossary Terms
Also called financial leverage. The use of borrower funds to magnify return. Trading profitably on the equity, also called favorable financial leverage, means that the borrowed funds ...
The legal definition of conversion is the act of using property or funds with which one has been entrusted for purposes other than those for which the property was intended to be used by ...
The American Society of Appraisers, also referred to as ASA, is the largest voluntary membership, a multi-discipline trade association that stands for and promotes its appraiser members. ...
Method of valuing a property through examination and comparison of recent sales of comparable properties. ...
Purchase of part of property or property rights when condemnation takes place. The owner must be justly reimbursed. ...
One who has died with a valid will in effect. ...
Changing property ownership. An example is the sale of a home to another. ...
A right or interest in property held by a third party, which often limits the use and diminishes the value of the property, but usually does not prevent the transferring of title. The more ...
Real estate, home and life insurance use numerous ambiguous terms you should know because you can significantly benefit from them. Let’s discover what the word boot usually applies to ...
Have a question or comment?
We're here to help.