Why Do I Need An Appraisal?

This is a good question that you may have asked yourself at some point in time, especially if you were buying a home. Most people are aware of the traditional areas where you would need an appraisal such as those required when you are buying, refinancing, or building a home. These are the areas that the majority of people are exposed to. Today I want to focus on those areas that may not be so well known. Anytime you need to know what your home is worth, you need an appraisal. I have touched on some of these areas in previous posts but will explain them in more detail here. The first area is:

Marketing Appraisals:

• These appraisals are typically done for FSBO sellers wanting to price their home to be competitive with what other homes are selling for.
• In addition they can be done for people that are having a hard time selling their home.
• One of the top reasons a home does not sell is that it is over priced; therefore an appraisal can be performed to provide support for the asking price.
• On the other end of the spectrum a home that sells very quickly was probably priced too low.

Tax Appeal Appraisals:

• County Property Assessor sets assessment based on what other properties in the area have sold for.
• If the county has assessed your property using sales from last year and have not updated their records to reflect current sales prices your home may be assessed too high.
• You can get with the respective county offices to find out their exact procedure for appealing the value as well as the deadlines.
• An appraisal can help support your argument with the county if it shows that your home is worth less than what the county has it assessed at, which can help lower your property taxes.

Bankruptcy Appraisals:

• Both types of bankruptcy, chapter 7 and chapter 13, require the owner to provide proof of the value of their assets.
• This includes a value of their biggest asset, their home.
• There are various ways to get a value. These include a free online service (Zillo, etc), AVM’s, BPO, CMA, drive by appraisal, or full interior/exterior appraisal (most credible of the ones given).
• It is very important that the source of value be credible. This credibility begins with the source of the appraisal (who did it), so the experience and reputation of the appraiser is important as well as the certification level of the appraiser.

Estate Planning:

• This type of appraisal is typically performed to determine the value of assets for the following reasons:
• Estate Tax-equitable distribution of assets; value for IRS
• Gift Tax-Used to determine the taxes to be paid on a gift of real estate
• Trusts-Property transfers to charitable trust require appraisals for IRS
• Financial Planning
• Guardianship/Conservatorship

Foreclosure Appraisals:

• These types of appraisals are typically required by lenders when mortgage payments become 90 to 120 days past due.
• It is performed to give the lender an idea of the current market value of the home. By knowing the value they are able to make more informed decisions regarding the equity in a home or the charge off liability.
• After the bank takes back the property it becomes an REO (real estate owned) property, completely owned by the bank.
• If it does no sell in a certain time period the bank usually gets another appraisal to determine if market conditions have changed along with the value.

PMI Reduction:

•  Homeowners have the option of providing an appraisal to their mortgage servicer to determine if their mortgage loan meets the loan to value guidelines.
• This is typically 80%, however this should be verified with the servicer as well their company specific guidelines for dropping pmi.

Please let me know if you have any questions about these types of appraisals, I would be glad to talk with you about it.

If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.