Last week we discussed the meaning of a ‘Comparative Market Analysis’ which some people confuse with an appraisal report. But there is a difference. Though a CMA determines the market value of a property based on similar properties in the property’s area, an ‘Appraisal Report’ is what is required by a mortgage company before providing a loan for the property. Banks and mortgage companies will give a home buyer a loan based on the appraised value of the property.
Appraisal Reports are generated by appraisers. Appraisers are state licensed, are knowledgeable about the real estate market, and are an objective third party with no connection to the buyer or seller. A home buyer pays for the property appraisal when applying for a home loan.
Appraisals are based on:
- The kind of area in which the property is located
- How long it should take to sell the property
- Assessing the market where the property is located
- Comparing the ‘subject property’ with 3 similar properties sold in the area in the last 12 months
- Assessing any negative aspects that may affect the value of the property
- How much the property would cost to replace if it would be destroyed
Photo by Stuart Miles