The appraisal is a vital part of the real estate purchase process and one of the least understood aspects of real estate. Within the context of the home purchase and sale, an appraisal is a risk analysis for the lender. The buyer’s lender uses an appraisal to determine whether there is sufficient value in the property to accept it as collateral.
An appraisal is in its simplest form is an:
- Opinion of value
- For a stated purpose
- As of a given date
- That is defensible
An appraisal is an opinion of value. What sets a professional appraisal apart from your opinion or my opinion is that it is the opinion of a trained professional who applies a recognized set of principles and methodology to derive that opinion. It’s an informed opinion based on facts.
The appraisal is for a stated purpose, such as, a loan. The lender wants to be sure there is adequate value in the property to justify making the loan.
The appraisal is good only at a certain date in time. The appraiser’s opinion of value is based on the most recent historical sales to establish an opinion as of a specific date. An appraisal looks back in time to gather data and does not look forward to project value.
The appraiser’s opinion is defensible based upon factual data of what actually sold, and, a proven accepted approach to determine the value of a property. It’s not a “best guess” or “hunch” or “feel.”
Finally, appraisals are really for the lenders than the buyers/borrowers. Lenders have to justify their decision to loan money to their Board of Directors; buyers decide what a home will be worth, to them, in the long run.
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Tags: first time home buyer, home buyer, real estate appraisal, san mateo county real estate
Raymond Stoklosa, Broker/Co-Owner
Chela Stoklosa, Realtor/Co-Owner
