After you find a home that you want to buy, most people will get a loan unless they are paying all cash. One of the most important aspects of getting a loan is the I have listed a few appraisal questions below to help buyers and sellers understand how an appraisal will affect the sale.
WHAT HAPPENS IF THE HOME I AM BUYING OR SELLING DOES NOT APPRAISE FOR THE VALUE AGREED ON?
When a home does not appraise this can be very serious for both the buyer and the seller. There are two solutions to this problem:
- The seller can agree to sell the home for the appraised value.
- The buyer can pay the difference between the appraised value and the agreed on price
If the two solutions above will not work, you can try these options:
- The buyer can go to another lender, and pay for another appraisal and hope the home appraises the second time.
- The buyer can try to appeal the appraisal though the lender.
- The buyer can go to a lender that has “Portfolio” money to lend.
In my experience getting another lender does work, but not always work. Finding a portfolio lender is often a better solution. However, portfolio lenders are normally only used when the loan amount is greater than a million dollars and the buyers credit is extremely good to be able to qualify.
When a home does not appraise this can be very serious for both the buyer and the seller. If you are a buyer, you will want to make sure before you agree on a price that the home will appraise. As an appraiser, it is easy for me to help you determine the value of a home and I always advise my clients on the value of a home before I write an offer.
If you do not know the value of a home you are making an offer on, and it does not appraise, it can be very expensive for a buyer. The cost for both an appraisal and an inspection can be as much as $1,500.00 and it will not cost the seller anything. The seller does not have to sell the home if the buyer cannot come up with the money for the agreed price.
WHAT IS THE DIFFERENCE BETWEEN AN APPRAISAL AND MARKET VALUE?
This is an important appraisal question, because you can get an appraisal without selling your home.
- An appraisal is an estimate of value on a given day.
- The definition of market value is “what property should sell for, assuming there is a willing buyer and a willing seller.”
WHY SHOULD I GET AN APPRAISAL IF MY SPOUSE DIES?
I suggest you consult an accountant in regards to this question, as tax laws change.
Today, when a spouse dies, it is important for tax reasons to get an appraisal. The living spouse can use the apparel when the home is sold in the future. The value obtained by the appraisal can be the starting point of taxable equity value. You may not need to pay any capital gains taxes.
For example, if you bought your home for $200,000 and the appraised value of the home on the day of death of your spouse is $1,000,000, you may able to sell the home for up to $1,250,000 without paying federal or state capital gains taxes. However, if you sell the home for $1,350,000, you may be taxed on the additional $100,000 equity,
WHAT IS THE DIFFERENCE BETWEEN REAL ESTATE AND PERSONAL PROPERTY?
- Real estate cannot not be moved as it is permanently attached to the land or the home on the land. For example: Curtains, TV mounts, attached cabinets, built it refrigerators, built in speakers, and tress.
When you sell your home you cannot remove attached items.
You can remove an attached item form a home if the buyer agrees to the removal.
- Personal property is movable. For example, TVs, Refrigerators, washer and dryer, beds, couches, rugs. Basically, anything in your home that you can pick
up without using a tools to remove it.
You can sell personal items with a home (fully furnished), but you may need to state in the agreement that the personal property is sold without any value.
HOW DO APPRAISERS MEASURE A HOME?
For most detached residential structures, the “total living area” or “floor area” is measured on the exterior of the building and includes walls and finish. However,
condominiums are measured using interior measurements.
A garage is measured but is not in the living space, but does have value.
Stairways are sometimes omitted as part of the living space.
A living space area must have an attached heater or be part of the heating system.
DOES A ROOM NEED TO HAVE A CLOSET TO BE CALLED A BED ROOM?
In San Luis Obispo County, having a closet in a room is not a requirement to be able to call a room a bedroom. SLO County does require that the home has a window that can be used for escape in the event of a disaster, such as a fire.
There are some Counties that require that the home have a closet to be called bedroom.
It is not a requirement in SLO County to not have a nearby bathroom to a bedroom, but may be a requirement of the appraiser. The appraiser does not have to give as much value to a room that is being used as a bedroom without a nearby bathroom. However, the appraiser will look at the county records, and the appraiser will use the recorded record to justify the room as a bedroom.
I hope you find the appraisal information useful. If you would like an explanation or more information about Appraisal, please feel free to contact me anytime or call at 805-270-5860.