When it comes to selling or buying a home there are a lot of different factors that you need to keep in mind. One of these important details is having a private appraisal done on the property. Most people don’t know what an appraisal is until they decide to buy their first home.
Even though a property appraisal sounds simple and easy, it is a really important step in buying or selling a home. One of the most common questions people ask is “Why do I need a private appraisal when a government tax appraisal has already been done?”.
The Difference Between Tax Appraisals and Private Appraisals:
Honestly there are several ways that tax appraisals and private appraisals are the same and some ways in which they are very different. The reason why a private appraisal is so important is so that you can understand what the market value of your property truly is.
A tax (or government) appraisal is a more simple process. Usually the official in charge of determining the tax appraisal will determine the assessed value by looking at other homes within the county to find an average amount in your area of what similar nearby homes are valued at. They will also take a look around the outside of the property and other properties near yours to help determine this amount.
The tax appraisal process is a lot less in depth and is more of an average based on where you live and other homes within your area. It is really more of a generalized idea of what your home is valued at and is not an exact amount. These types of appraisals are used primarily for tax purposes in order to make sure that you are paying the amount of property taxes that you should be.
Private appraisals or appraisals for mortgage loans are much more in depth. A state certified appraiser will need complete access to every part of your home. This means they will need to inspect every room in the house including bathrooms, kitchens, bedrooms, laundry rooms, and even attics. They will need to be able to take plenty of pictures of everything in order to fairly consider the condition of your home, including any updating or remodeling.
The appraiser investigates everything in order to be as thorough as possible. They will also fully assess the outside of the home. Measuring around the house will help them get the accurate square footage of the property and they will even factor in things like gardens, water features like ponds, square footage of decks, as well as sheds or detached parts of the home like barns and additional inside parking space.
With all of the investigating that they do on the property, a state certified appraiser also investigates around the neighborhood to see what other similar properties are like and how yours compares. They will also do their own research, looking at what comparable properties in the area have sold for recently as well as what comparable homes are priced at that are currently on the market.
When do I need to have an appraisal done?
When Selling a Home:
An appraisal is used for determining the value of your home when you are looking into selling your home and for pretty obvious reasons. You want to make sure that you are getting the most out of selling your property and definitely don’t want to sell it for less than what you bought it for. Appraisals help buyers as well. When an appraisal is done if the appraisal is low that means buyers can usually negotiate with the seller to lower the price of the property.
One extremely common reason why people have appraisals done is when they want to renovate. Renovations can become very expensive very quickly. Being able to access what parts of the home could use some renovating can be a great way to increase your homes value. An appraiser can easily point out what parts of your home could most use renovating and help give you a better idea of what type of an increase in value your home will have due to that type of renovation. In Florida you have to remember to 50% rule when looking into any renovations.
When taking out a loan, maybe for business or investment purposes, you may need to learn what the value of your home is to use as collateral. It is much more common than you think. Some people need to take out a loan for one reason or another and the easiest way to get the most out of your loan is by having your homes value assessed. If you don’t, you will be taking a gamble of what the lender will be willing to offer and some lenders will require that you have your property appraised if you intent on using it as collateral towards the desired loan.
PMI (Private Mortgage Insurance):
Private mortgage insurance can be a little confusing for those who have not bought a home before. To be clear, private mortgage insurance is there to protect the lender, not to protect the homeowner. This type of insurance is there in case for any reason the homeowner is unable to or decides to stop making their monthly payments. This is a requirement when financing with a loan and when you are unable to make a 20% down payment. That is where an appraisal can come in very handy.
Basically when you have made enough of your monthly payments and have paid off 20% of the loan you can have your home appraised. This is just to prove that you have made enough payments to qualify to drop the private mortgage insurance or that the value of your home has increased leaving you with a remaining loan amount below 80%. Either way, dropping the PMI can reduce your monthly payments a fair amount and help you to start saving money or paying off other debits.