When do you need an APPRAISAL?

Whether someone is buying, selling, or refinancing a home, an appraiser will typically be involved.  Lenders will bring in a licensed appraiser to develop an unbiased (third party) estimate of a properties market value. Why? An appraisal will: help bring clarity to lenders for loan purposes, bring in someone who has no skin in the game, and they are local experts at collecting and analyzing data.

Are these the only instances to get an appraisal? Are there other times when the services of a certified, licensed, independent real estate professional might come in handy? Here are the other most popular uses for an appraisal:

1.)  Divorce / Estate Planning / Liquidation

Unforeseen circumstances happen all the time and can be a very stressful experience. Marriage separations, loss of loved ones, emergencies, etc... are often complicated by difficult decisions regarding the disposition of an estate. Typically, Americans do not have dedicated estate planners or executors to handle these issues. In most cases, a home or other real property makes up a disproportionate share of the total estate value.

Here's where an appraiser can help. The first step in fairly disposing of an estate is to understand its market value.  Once an estimate of market value is derived, the clarity allows the parties involved to move forward without dispute. 

2.)  Private Mortgage Insurance (PMI) Removal

Private Mortgage Insurance (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. This additional payment is folded into the monthly mortgage payment and is quickly forgotten. In reality, 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 homeowners 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 value. Some will even take the next step and help you file a challenge with your mortgage company. The costs of these services are very often recovered in just a few months of not paying the PMI.

3.)  Pre-Sale Decisions

Before someone decides to sell/refinance a home, there are several decisions to be made. Questions such as: How much do I want to sell/appraise the house for? What updates/renovations/repairs need to occur? What should I not do? Should I put in that third bathroom? Should I complete my kitchen remodel? Updates/renovations that we do to our houses typically have an effect on their value, one way or the other. Unfortunately, not all of them have an equal effect. 

Appraisers can step in and help bring clarity to these decisions. An appraiser has no vested interest in what amount the house sells for. Our fee is based on our efforts, not a percentage of the sales price. Seeking a professional appraisal can often help homeowners make more effective decisions on their home projects leading up to selling/refinancing.

4.)  Property Tax Challenges

Everyone has a different perspective of what a house is worth. And it's the tax assessor that seems to always come in at the high end of the scale! Challenging the tax assessment has become an annual ritual in many parts of the country. Unfortunately, most people go into these challenges unarmed. They may pull some information from the internet (like a zestimate) to support their claims but have no real basis other than: ''It wasn't worth that much last year.''

Selecting the most appropriate sales of other homes to strengthen your case against your property taxes will go a long way. An appraiser does this for a living. Use our expertise to help save you money if you believe that they valued your property incorrectly.