Answer for "What is an appraised value?"

Erik Smith real estate agent
  Coldwell Banker Residential Brokerage - Orange Post Rd

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.


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