With the real estate market in such a sharp tailspin lately, many banks have been having a lot of trouble establishing the true value of the home they are supposed to be lending on. Normally they hire a third party valuation expert, called an appraiser, to assess the value of the home and report back to them. Appraisers are certified real estate experts who can validate the worth of any real estate and are the most reliable way to do so.
In the appraisal the analysis of market data is used to compare properties with similar attributes to establish a price window. This is done so banks do not loan too much money on a property that they cannot get their initial loan amount back if they have to foreclose on it. Otherwise, if the property owner could not or would not pay the bank would be left holding the bag, as in a rapidly depreciating market.
An appraiser can not just be someone off of the street. An appraiser is a formerly trained person who knows the trends and values of the local real estate market. The objective valuation an appraiser is supposed to provide cannot be influenced by buyer nor seller or the entire appraisal may be corrupted and unreliable.
Without that, the entire process has a shadow of doubt cast over it and may be deemed useless, or a real liability in a court of law.
When, in the rare case, an appraiser cannot justify the financed amount for the subject property the course of action usually heads one of two ways. The transaction is either dropped and forgotten about, or the seller or the buyer will make an adjustment to allow the transaction to continue.
Although many home buyers do not like the fact that they are subsidizing the banks investment by paying for an appraisal, there really id not a good way around it. Until we find a better solution for establishing valuations for real estate, we are likely to continue to have to deal with appraisals for a long time.
In the appraisal the analysis of market data is used to compare properties with similar attributes to establish a price window. This is done so banks do not loan too much money on a property that they cannot get their initial loan amount back if they have to foreclose on it. Otherwise, if the property owner could not or would not pay the bank would be left holding the bag, as in a rapidly depreciating market.
An appraiser can not just be someone off of the street. An appraiser is a formerly trained person who knows the trends and values of the local real estate market. The objective valuation an appraiser is supposed to provide cannot be influenced by buyer nor seller or the entire appraisal may be corrupted and unreliable.
Without that, the entire process has a shadow of doubt cast over it and may be deemed useless, or a real liability in a court of law.
When, in the rare case, an appraiser cannot justify the financed amount for the subject property the course of action usually heads one of two ways. The transaction is either dropped and forgotten about, or the seller or the buyer will make an adjustment to allow the transaction to continue.
Although many home buyers do not like the fact that they are subsidizing the banks investment by paying for an appraisal, there really id not a good way around it. Until we find a better solution for establishing valuations for real estate, we are likely to continue to have to deal with appraisals for a long time.
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