Do You Really Need a Home Appraisal?
Unless you are a cash for home buyer, a real estate appraisal is part of bureaucratic red tape and is required by virtually every lender in the country. In this article, we will review the value of getting an appraisal and if it is truly necessary or just part of what seems to be the never-ending bureaucracy of buying a home.
Sources to Determine Value
Most home buyers are not experienced real estate professionals nor do they have access to the MLS or other databases with previous home sales and other relevant market information. They have no reliable method to determine the actual value of a home and generally depend upon the limited data found on the internet or the advice of a real estate agent.
The home value estimates found on the internet are general in nature based upon an algorithm that calculates the value of a home based upon only a handful of data points. The algorithm does not take into consideration the actual attributes of the home you are purchasing. For example, it will estimate the value of a home that is adjacent to a landfill for the same amount as a similar home in the same neighborhood that is adjacent to a beautiful park. These systems are useful in gaining general insight into home values but cannot be relied upon to make one of the largest purchasing decisions of your lifetime.
The other source of home values is your local real estate agent. They have access to the MLS database that has detailed information on past sales activity as well as the prices of homes that are currently on the market. Unfortunately, many unscrupulous real estate agents are only interested in the commission and do not care if a purchaser overpays for a home.
The data provided to the purchaser by an unscrupulous real estate agent can be manipulated. For example, they can provide you with previous home sales that show a very high price but fail to mention that those homes were totally renovated with new kitchens, baths, roof, and mechanical systems and are not comparable to the home you are potentially purchasing.
Don’t Over Pay
Many home buyers believe an appraisal only benefits the lender, but this is not true and overlooks how an appraisal protects a purchaser from overpaying for a home.
For the home buyer, the appraisal is like an insurance policy against grossly overpaying for a home. When you get an appraisal, the estimated value of the home is provided by a disinterested third-party professional who will actually inspect the home and compare it to similar homes in the neighborhood.
The appraiser will then adjust the value of the home you are purchasing based upon the actual attributes versus similar homes recently sold in the same neighborhood. He will not value a home adjacent to a landfill the same as a home next to a beautiful park nor does he earn a commission if you buy the home.
For large banks and financial institutions, an appraisal is one step in the process designed to protect their investment and limit fraud. If you think about it, a large lending institution is lending billions of dollars on properties sight unseen with other people’s money – all being done by loan processors who are not real estate specialists but only trained on how to process loans. The only person in the loan approval process that will actually see the home and that has any experience in actually valuing a home is the appraiser. The appraiser is a licensed professional with the experience, knowledge, and access to the data to inspect a home and produce an estimate of value.
An appraisal from an independent disinterested third party provides the lender with pictures of the property, a rudimentary floor plan, a visual inspection report, and an estimated value based upon comparable sales. The appraisal also provides a picture of the comparable sales, the source of the sales data, a map pinpointing the location of the home in relation to the comparable homes, and a plethora of other information. Finally, the licensed professional appraiser carries errors and omissions insurance that protects the lender from any malfeasance or material mistakes of the appraiser.
This appraisal, coupled with a title report, survey, credit report, tax return verification, bank statements, and employment verification among other things are all designed to prevent fraud and allow the lender to make the loan that has a high probability of being paid back, or if not paid back, the collateral can be sold to pay off most if not all of the loan.
Is an Appraisal Necessary?
So, is an appraisal really necessary? Most real estate professionals and all large lending institutions believe so and depend on them to loan billions of dollars on homes they have never seen.
We, at OutFactors.com, believe an appraisal is necessary when selling a home the traditional method but not when selling to a home cash buyer, like OutFactors.
We Pay Cash for Homes
If you would like to learn more about our cash for home programs and how you can sell your house for the HIGHEST cash price, please visit OutFactors.com. And if you are ready to see how much we will pay for your home, click here to get your fast and free cash for home offer. The people at OutFactors are super easy to talk to and will answer all of your questions concerning our cash for home buying process.
539 West Commerce Street
Dallas, Texas 75208
Home Appraisal Really Necessary | Cash for Home | OutFactors — Dallas Fort Worth, Texas