When do you need an Appraisal?
Every year, countless people in the United States buy, sell or refinance their own slice of the American Dream. Most, if not all, of these transactions include a simple line item for an appraisal. It has become a reasonable and accepted part of a real estate transaction: ''Let's bring in the expert and make sure we're not spending too much on this property.'' But this isn't the only reason to get an appraisal. There other times when the services of a certified, licensed, independent real estate professional can save money, time and energy.
Property Tax Challenges
Every one has a different perspective of what a house is worth. Appealing a property tax assessment (called 'grieving' in Vermont and 'abating' in New Hampshire) that seems too high is the right of all property owners. Appealing your property's assessment is a straightforward, non-punitive process. Many people refrain from questioning their assessment because they don't want to 'rock the boat' or be perceived as not wanting to pay their 'fair share' of a community's obligations. Others are afraid the process could result in their neighbors' taxes being raised (by law this is precluded). Unfortunately, most folks go into these challenges under-armed. They may pull some information from the internet to support their claims, but many times there's no real objective basis, just the subjective opinion ''I don't think my property is worth as much as you say...''.
A real estate appraiser can help in these situations. A professional appraisal carries significant weight when you appear before the Town's property valuation authority (called 'Listers' in Vermont and 'Assessors' in New Hampshire), or an appeals board.
Private Mortgage Insurance or PMI is the supplemental insurance that many lenders ask home buyers to purchase when the amount being loaned is more than 80% of the value of the home. Very often, this additional payment is folded into the monthly mortgage payment and is quickly forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan - whether through market appreciation or principal paydown - dips below this 80% level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met.
Many appraisers offer a specific service for home owners that believe they have met the 80% loan-to-value metric. For a nominal fee, the appraiser can provide you with a statement regarding the home's value. Some will even take the next step and help you file a challenge with your mortgage company. The costs of an appraiser's services can often be quickly recovered in a short period of not paying the PMI.
Before someone decides to sell a home, there are several decisions to be made. First and foremost: ''How much should it sell for?'' But first there may be other equally important questions to ask: ''Would it be better to paint the entire house first?'' ''Should I put in that third bathroom?'' ''Should I complete my kitchen remodel?'' Many things which we do to our homes have an effect on their value, and unfortunately, not all of them have an equal effect. While a kitchen remodel may improve the appeal of a home, it may not add nearly enough to the value to justify the expense.
Appraisers help a seller make these decisions. As an objective professional, an appraiser has no vested interest in what amount a home sells for---his fee is based on his efforts, not a percentage of the sales price. So seeking a professional appraisal can often help homeowners make the most informed decisions on investing in their homes and setting an informed, reasonable sales price.
Estate Planning, Liquidation or Divorce
The passing of a loved one can be one of life's most difficult experiences; likewise, going through a divorce can be very stressful. These transitions are often complicated by decisions regarding the disposition of shared or inherited property. Unlike many wealthy individuals, most Americans do not have dedicated estate planners or executors to handle these issues. Also, in many cases, a home or other real property can make up the bulk of an estate's total value.
An appraiser can help. Often, the first step in settling an estate or a divorce disposition is to understand the value of any real property involved. Once an analyzed, objective value is determined, equitable arrangements can more easily be reached by all parties.
There are other uses for real estate appraisals. The highly-trained individuals offering appraisal services are always looking for ways to put their expertise to work for property owners and the lenders, brokers, attorneys and accountants who support them.