As with most things within real estate, appraisals are commonplace in the industry, but are rarely understood by the involved parties. A real estate appraisal, property valuation or land valuation is the process of developing an opinion of value for real property. Real estate transactions often require appraisals because they occur infrequently and every property is unique, unlike corporate stocks, which are traded daily and are identical. In layman's terms, an appraisal is used by a lender to determine the value of the property, so that in the case that the owner stops making mortgage payments, the lending institution would be able to re-sell the property and recoup the money the lent. If the appraiser comes up with a lower value then what was agreed upon by the buyer and seller, the seller would have to either sell the property at the appriased value, or cancel the transaction and hope for a cash buyer to come next, because if the next buyer is using a loan, then their lender would just refer back to the appraisal from the previously cancelled transaction. Conversely, if the appraiser values the property for more then what is agreed upon by the buyer and seller, then the buyer starts off their home ownership with free equity! With our recent, extreme sellers market, we have seen a lot of low appraisals because the buyers are so desperate to get into escrow, that they overbid each other and end up driving up the purchase price to a height that the appraiser simply cannot find comps for. Whats the solution you ask? More listings! Contact me today if you'd like to know what your property could be worth!
