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Seaside Park Real Estate: The What, Why, and Importance of an Appraisal

Posted on: December 1st, 2020 by admin

Any person who has ever bought or sold a property is familiar with the term appraisal. There is, however, likely a lot that many don’t know about this important Seaside Park real estate process. Buying and selling a home can be a stressful and confusing journey.  There are many steps that happen either without the client’s knowledge or, more likely, their full comprehension. However, not understanding what is happening during the process leaves you vulnerable. An appraisal is designed to provide an unbiased assessment of the property’s worth. This protect the lender by confirming that they are providing a loan for an appropriate amount of money.

What is an Appraisal

As previously described, an appraisal is an assessment of a property’s value. It should be performed by a licensed, non-biased individual or a third party who has no vested interest in the transaction. This ensures it is a fair and accurate judgement. An appraisal is almost always necessary for the sale and purchase of a property, but is also routinely used in refinance transactions. The only deal that will not require an appraisal is an all cash sale. In this case, there is no money being lent so the value of the home is irrelevant to the purchase price.

How is the Value Determined

Seaside Park real estate appraisers desk with open black laptop and silver calculator. Assorted other office equipment and items blurred in background.

There are three common schools of thought on determining a residence’s value. These are the sales comparison approach, the cost approach, and the income approach. The sales comparison approach looks at how much similar properties in the same location have sold for recently. The cost approach uses what the cost of construction would be. After determining that number, any depreciation is taken into account and then the cost of the land is added to determine the market value. Lastly, the income approach is used almost exclusively for commercial or business real estate transactions.

Who Performs an Appraisal

An appraisal for your Seaside Park real estate transaction should only be completed by a certified or licensed professional like those in our offices. There are four levels of appraisers that can perform appraisals in New Jersey. The first level is a trainee appraiser. There is no prior experience required to become a trainee appraiser. In order to take the first step to become an appraiser, a trainee must complete 75 hours of approved education. Once the application is completed and approved, a trainee must find a certified appraiser to be their supervisor. Upon the completion of 1,000 appraisal related working hours and 150 hours of qualifying education, a trainee can apply to become licensed. The top-tier is a certified appraiser. This level requires the fulfillment of one of six college education options. Plus, additional approved education hours and 1,500 hours working related to appraising. A certified appraiser has to apply to become one and must also pass the Certified Residential Appraiser Exam.

Why Are Appraisals Done

An appraisal is something that is requested by the mortgage lender. The reason this is done is to ensure that the lender is not mortgaging a loan that is more than what the property is valued at. If this does turn out to be the case, the lender may require the buyer to pay the difference in cost. Depending on the type of loan, a more explicit appraisal may be needed.  This is true in the case of loans such as VA loans or FHA loans. In these instances, if any issues are found during the appraisal, most will need to be fixed prior to the closing.

An Appraisal Will Happen and Now You Know Why

Most likely, in any New Jersey real estate transaction you experience, you’ll have an appraisal. In the best of cases, everything goes without any questions or hitches and it is just one item to complete on your checklist. However, if the valuation comes in under the amount of the mortgage, a sale can be hugely disrupted. In the worst case, a sale may completely fall through. Either way, with the knowledge you now have, you can understand more of the process and why it is done.

No matter what your Seaside Park real estate needs are, Birchler Realtors is here for you. Contact Us today!

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