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Why Get an Appraisal and When Do I Need One?
When do you need an Appraisal?
Every year, countless people in the
United States buy,
sell or refinance their own slice of the American
Dream. Most, if not all, of these transactions
include a simple line item for an appraisal. It has
become an understood and accepted part of a real
estate transaction. ''Let's bring in the expert and
make sure we're not spending too much on this
property.''
But is this the only reason to get an appraisal? Are
there other times when the services of a certified,
licensed, independent real estate
professional might come in handy?
Property Tax Challenges
It's a running joke that every one has a different
perspective of what a property is worth. And it's
the tax assessor that seems to always come in at the
high end of the scale! Challenging the tax
assessment has become an annual ritual in many parts
of the country. Unfortunately, most people go into
these challenges unarmed. They may pull some
information from the internet to support their
claims, but have no real basis other than: ''It
wasn't worth that much last year.''
A real estate appraiser can help in these
situations. While it may not be economical to
commission a full appraisals to lop a few hundred
off your tax bill, often an appraiser can do a
limited appraisal or neighborhood analysis for much
less. These documents can carry a lot of weight when
you appear before an appeals board.
PMI Removal
Private Mortgage Insurance or PMI is the
supplemental insurance that many lenders ask home
buyers to purchase when the amount being loaned is
more than 80% of the value of the home. Very often,
this additional payment is folded into the monthly
mortgage payment and is quickly forgotten. This is
unfortunate because PMI becomes unnecessary when the
remaining balance of the loan - whether through
market appreciation or principal paydown - dips
below this 80% level. In fact, the United States
Congress passed a law in 1998 (the Homeowners
Protection Act of 1998) that requires lenders to
remove the PMI payments when the loan-to-value ratio
conditions have been met.
Many appraisers offer a specific service for home
owners that believe they have met the 80%
loan-to-value metric. For a nominal fee, the
appraiser can provide you with a statement regarding
the home value. Some will even take the next step
and help you file a challenge with your mortgage
company. The costs of these services are very often
recovered in just a few months of not paying the
PMI.
Pre-Sale Decisions
Before someone decides to sell real property, there
are several decisions to be made. First and
foremost: ''How much should it sell for?'' But first
there may be other equally important questions to
ask: ''Would it be better to paint the entire
structure first?'' ''Should I renovate?'' ''Should I
complete the addition?'' Many things which we do to
our buildings have an effect on their value.
Unfortunately, not all of them have an equal effect.
While additional buildout may improve the appeal of
a building, it may not add nearly enough to the
value to justify the expense.
Appraisers can step in and help make these
decisions. Unlike a Realtor, an appraiser has no
vested interest in what amount the house sells for.
His fee is based on his efforts, not a percentage of
the sales price. So seeking a professional appraisal
can often help property owners make the best
decisions on investing in their property and setting
a fair sales price.
Estate Planning, Liquidation or Divorce
The loss of a loved one is a difficult time in life.
Likewise, a divorce can be a particularly traumatic
experience. Sadly, these events are often
complicated by difficult decisions regarding the
disposition of an estate. Unlike many wealthy
individuals, the majority of Americans do not have
dedicated estate planners or executors to handle
these issues. Also, in most cases, a home or other
real property makes up a disproportionate share of
the total estate value.
Here too, an appraiser can help. Often the first
step in fairly disposing of an estate is to
understand its true value. Where property is
involved, the appraiser can help determine the true
value. At this point, equitable arrangements can
more easily be arrived at among disputing parties.
Everyone walks away knowing they've received a fair
deal.
There are other uses for real estate appraisals. The
highly-trained individuals behind these services are
always looking for ways to put their expertise to
work for property owners and the people who support
them.
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