Video Transcript: Appraisals 101
Stacey: So what exactly is an appraisal and how do you get one? Let's find out on "What Works Now."
Voice Over: AOL and Bank of America Home Loans – helping you find out what works now.
Narrator: In the world of real estate, houses are put up for sale, mortgages are obtained, and buyers, well, buy. But none of this can take place without knowing one thing.
Stacey: The value of your home. And that's precisely what the appraisal is for.
Narrator: Simply put, an appraisal is an expert's opinion of how much your home is worth. In other words, it's the number lenders refer to when deciding whether or not to approve loans.
Stacey: Now let's not confuse an appraisal with the asking price of a home. While those two numbers may end up being very close, in reality they're actually two very different things.
Narrator: To understand this better, let's take a look at who's involved. There's the seller, the buyer, and the bank or lender. Now the seller will probably have a real estate agent who will use a CMA, or Comparative Market Analysis, to determine a realistic asking price for the home. An interested buyer comes along and will need to obtain a mortgage from the bank. Now, the bank wants to make sure that the loan it gives out matches the actual value of the property in question. They need a qualified, objective third party to come in and assess the value of the home. Enter: the real estate appraiser.
Paul: Hi, I'm Paul Isolda, I'm a real estate appraiser, and I've been working in this area for about 22 years.
Narrator: Well that's a good thing, because this is a situation where experience definitely comes in handy.
Stacey: You see, arriving at that final appraisal figure is no easy task. There are many factors that need to be carefully weighed, including the state of the real estate market in your local area.
Narrator: To start with, there are the basic characteristics of the home. The gross living area, or GLA, non-living areas like garages and porches, finished basements, overall acreage, ease of access, and the condition of the foundation, as well as other supporting structures.
Stacey: Keep in mind that we're only talking about permanent fixtures and real property. So while this sconce [points to sconce] is rather nice, it doesn't count in the valuation. Right, Paul?
Paul: [Peaks his head in] Nope.
Narrator: Now, items like garden sheds and above ground pools may or may not count, depending on the specific installation and local custom. The other factors of the appraisal have to do with the neighborhood. For example, the type of area: is it part of a development, or is it stand alone acreage? The recent sale prices of comparable homes located nearby. The average sales time of this type of property. And the proximity to desirable schools and public facilities.
Stacey: It's a lot to consider, so you can see how having experience valuing a property within a given neighborhood is critical to arriving at an accurate appraisal.
Narrator: So how long does all this take? Well, depending on the size of the property, the actual visit should take anywhere between 15 minutes to an hour or so.
Stacey: And don't ask the appraiser for the magic number as he's leaving. He won't have it yet, anyway. [To Paul] Almost done?
Paul: Yep, just about.
Narrator: Nope, it's back to the office to compile all the data. Then a report is sent over to the lender.
Stacey: So who gets the bill when all this is done?
Narrator: Usually, the lender arranges for the appraisal, but the buyer is responsible for paying the bill. For an average home, that's usually around $300 to $500. That fee is collected regardless of whether the buyer closes or not.
Stacey: So there you have it. An appraisal is a key component of any real estate transaction. And while it takes a little bit of work, it's important that you get it right. [To Paul, off screen] Hey Paul, does this pond count?
Stacey: Thought so.
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