Whether you are a long-time homeowner or purchasing your first home, getting an appraisal is critical in knowing how much the home is worth before you pay the asking price for it.
Here are six reasons why you need a home appraisal before buying or selling a home:
A home appraisal is a professional, unbiased estimate of the value of a property. This information is used to get an accurate description of the property and is not a home inspection. The appraiser will look at market data and public records, comparing them to similar properties, among other factors, before issuing a report detailing the property and its fair market value.
By law, appraisers cannot work for or with your mortgage company. This rule is to prevent biased appraisals.
Lenders will not issue a home loan if the appraised value of the house is less than the loan amount. If the property is not matched to the home loan, the loan will be rejected.
If you want to refinance your home, you will be required to get your home appraised. When done at the right, time refinancing your home can save you money. A home refinance restructures your home loan to take advantage of the current rate environment with the goal of paying less interest over the life of the loan.
A home equity loan cannot be issued without a home appraisal. Known as a “second mortgage”, a home equity loan uses your home as collateral to provide you with a set amount of money to work with, rather than revolving credit. To know how much money can be loaned to you, lenders use home appraisals to appraise the fair market value of your home.
If you have to pay private mortgage insurance (PMI) each month along with your mortgage payments, getting your home appraised can remove it. This termination happens when the home is appraised by a professional and it is determined that the loan-to-value ratio is 78% of the original value.
In many states, your property tax is based on the fair market value of your home. In Missouri, if you wish to appeal your tax assessment, you must appeal with evidence such as photographs and the “oral testimony of someone who has done a recent appraisal of your property.”
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