Buying and selling real estate entails a variety of steps, most of which have been designed to protect consumers. Many new guidelines were implemented after the 2008 stock market crash. The crash happened because too many people had loans they couldn’t afford due to relaxed lending practices. The relaxed lending practices led to high demand driving housing prices to levels that many could not afford otherwise.
This housing bubble was built long before 2008, it just eventually burst in 2008. The housing prices had risen so sharply at a fast rate, eventually the lenders were left holding the bag when the homeowners could not make the mortgage payments. Many lenders and other real estate market participants laid some of the blame on real estate appraisers as they were the ones determining the home values. This ultimately led to more guidance handed down to appraisers. However, in the defense of real estate appraisers everywhere, an appraised value is an opinion based on what the market will accept. Therefore, if the market was accepting a certain amount at the time of the appraisal, they were not necessarily wrong. Additionally, real estate appraisers must adhere to state-specific licensing requirements as well as Uniform Standards of Professional Appraisal Practices (USPAP) and if they do not they can face penalties and loss of license. Most appraisers aren’t willing to lose their license over an appraisal.
Whether you are financing your home or paying cash, the best way to determine its value at the time of the transaction is a real estate appraisal by a licensed appraiser. An appraisal is an unbiased professional opinion of the value of a home. Once an appraisal is ordered, you can expect the following:
• The appraiser will contact the homeowner to schedule an appointment for a visual inspection. At the inspection, the appraiser will take pictures of the home’s interior and exterior and measure to determine the square footage. He or she will make notes as to any deferred maintenance or other issues observed.
• Once all the information is gathered at the inspection, he or she will then develop the appraisal report. The research includes examining the current market trends and recent sales of homes similar to the home being appraised, e.g., amenities, square footage, finishes, etcetera.
• Depending on the appraiser’s workload, you can expect an appraisal to take between two and four weeks.
Once the appraisal is received, the transaction can move forward. When entering into a real estate contract, it is always a good idea to add a contingency that the appraised value is equal to or more than the sale price. If it is lower than expected, this gives the buyer the opportunity to cancel the transaction and be entitled to any earnest money paid.
For all your real estate questions about buying and selling, contact Stutesman Action Realty at 833.286.8400.