The collapse of the economy began with a reality wind blowing against the sub-prime mortgage house of cards. We are all living with the results of over aggressive lending practices and over active government intervention. With all these friends who needs any enemies?
As the market realigns, property valuations have plummeted. Some of you may even be “upside down” on your mortgages. Do you buy? Do you sell? Do you ride out the tsunami? This series will go through all the major questions that we normally encounter in determining the value of a property. What are the drivers? What are the inhibitors? What you need to know to get the best value.
What is Property valuation/real estate appraisal?
The purpose of property valuation is to provide a current market based value for a property in comparison to others in its immediate vicinity. So an appraisal is time, location and geography specific. It is a comparative value – not an absolute. Second, real estate appraisals are broken into two broad categories – residential and commercial. For the purposes of these papers we will be discussing strictly residential appraisals. Residential real estate appraisers are licensed by their respective states and have different levels of license levels based on the value of loan for the property. They have to take classes and pass certification tests to gain and maintain their license status. They are also usually bounded by county because of the way Multiple Listing Services (MLS) keep and sell their records. So a good appraiser really knows their geography and what to look for.
Why does it cost so much?
Real estate appraisers are traditionally independent contractors/business people – no appraisals = no money. So while you are paying a relatively standard one time fee (e.g., $400) they have to make sure they get as many appraisals in as they can to make any profit at all. How’s that? After all they’ve got your $400. An appraiser has to cover all out of pocket expenses the same as any business person (education, health insurance, MLS fees, liability fees, business insurance, state fees – the list goes on). In addition a good appraiser may spend anywhere from 3 to 6 hours in preparation (looking for comparables, etc.), have a 45 minute or more drive time to location, 2 hours driving comparables and taking pictures and then another 1 -3 hours writing the report and then if the bank wants more info or kicks anything back they have to invest the time to answer questions, etc.
Also, is they get your request from another appraiser or from one…