Most appraisals are completed as part of the mortgage lending process, with the lender being the entity to request the appraisal. If you think of it this way, a bank has most of the money on the line. Before lending it to a borrower, they want to know whether that the property is worth the amount of money being borrowed to purchase it. The banks want to be sure that if for some reason the borrower stops making payments on the mortgage and stop paying off the loan, the bank can repossess the house and sell it in order to recoup the money lent in the first place. If an appraisal comes back to lender for far under the contract price, that would raise some concerns that the borrower is attempting to borrow more than the property is actually worth. Along with checking a borrower's credit score, debt-to-income ratio, etc., the appraisal helps the lender assess risk. This is known as the loan-to-value ratio. If a borrower is fronting 50% of the cost of the home for example, that means less risk for the bank. But if the borrower has a very small down payment and is borrowing 90% to 100% of the cost of the property then that is much more risky for the bank.
Other common reasons for an appraisal:
- Estate Appraisal (Also known as a “Date of Death Appraisal”): When an estate transfers ownership because of a death or inheritance, in most cases a real estate appraisal is needed for tax purposes and often to determine a listing price for the home. (click here to read more)
- Divorce Appraisal: For many couples, the marital residence is the largest asset obtained during the marriage and an accurate appraisal is extremely important (click here to read more)
- Financial and Estate Planning: Financial and Estate Planners are often relied upon by their clients to provide sound, well-informed advice and the value of the real estate assets are often needed to develop the best and most effective strategies for their clients (click here to read more)
- PMI Removal: If you purchased your home with conventional financing and put less than 20% down, it’s likely you’re paying PMI. If your property value has appreciated, providing your lender with an appraisal can help remove this additional cost (click to read more).
- Tax Assessment Appeals: Most real estate and property taxes are based upon the value of the property. When the taxing agency values your property at a higher rate than the actual value, you are paying too much in taxes (click here to read more).
- Pre-listing, Pre-Purchase, FSBO’s: When trying to establish a fair list price is often difficult to sift through all of the market data to determine a true value for your home. Itt’s common for homeowners and realtors to rely on appraisers for assistance when establishing a list price for the sale of their home (click here to read more).
A few words from our clients
Paul Rowe is a consummate professional. In appraisal work there are hard facts and there is nuance. Paul does not ignore factors that are outside of the facts that could influence the value of a piece of property - such as litigation regarding the property, conditions of the immediate neighborhood that might not be affecting other similar properties a few blocks away. Paul digs in, does his due diligence and is able to come up with a number that not only can be relied upon but can stand up in court (and has). Absolutely one the top appraisers in the Chicago metropolitan area.
Use Rowe Appraisal if you are looking for a knowledgeable and helpful company.
Real Estate Agent