How do appraisals and online home valuations work? Today I’ll answer these questions for you.
When it comes to determining home values, how do appraisals work? What about online valuation systems?
Most home sales involve an appraisal. If the buyer is using financing to buy the property, their lender is usually required to get an appraisal. An appraiser’s job is to look at the property and decide if it meets the minimum standard for the mortgage. Most homes these days won’t have a problem meeting that standard.
Next, they’ll determine whether the value of the home is appropriate, and they’ll use recent comparable home sales in the area as a measuring stick. To a certain degree, the rest depends on the opinion of the appraiser, and opinions can vary from person to person.
If the house appraises for less than the purchase price, the buyer still has the option of buying it—the lender doesn’t really care what they pay for it. For example, if a home appraises for $5,000 less than what the buyer agreed to pay for it, they’ll just have to come up with the additional $5,000 to close the transaction.
In a tight market like ours, homes are increasing in value, and as a result, we’re seeing more and more multiple-offer situations. Because of this, buyers are putting more money down in order to secure the purchase of their property.
A lot of online real estate companies like Zillow feature their own computerized home valuation system. These systems are fairly accurate in terms of big data, but when it comes to single properties, they have certain limitations. They can measure things like square footage and compare this to other homes in the area, but a computer doesn’t know anything about what’s inside the house.
That’s why, when we agents determine what a home will sell for, we rely both on the statistical data and the feed on the street (i.e., the home’s condition and how it compares to recently sold homes).
If you’d like to know what your home is worth or you want to know more about this topic, don’t hesitate to reach out to me. I’d be happy to help you.