Coverage of appraisal and factors affecting property value
Residential home appraisal and real estate appraisers for your foreclosure home buying and selling operations.
Home appraisal in simple terms
Real estate or home appraisal is a valuation of property by the estimate of an authorized person (appraiser). Some real estate professionals use appraisement, assessment, estimation, evaluation, and valuation to mean appraisal.
Lenders need appraisal before financing a foreclosure property that you are buying. Most lenders use their own or contracted appraisers who evaluate the worth of the foreclosure home to set a value for the lenders. The home that you plan to buy at foreclosure becomes their collateral.
Land or improvements?
Your foreclosure home is composed of two values:
- the value of the land, and
- the value of the improvements (house, garage, other superstructures on land).
Sometimes, the value of land makes the property a good buy, especially in prominent locations. So, don’t be overly concerned about the condition of the foreclosure property where the land is so valuable.
On the other hand, land may lose value due to the following:
- Flood zone
- Industrial plants, factories, commercial facilities
- Waste disposal/dump sites
- Nuclear plants, high-voltage facilities, acid rain etc.
- Oil leakage, soil with high radon content
When do you need a home appraisal?
Lenders request appraisals during the financing contingency period or just before the foreclosure sale. In general, the buyer typically has two weeks to obtain financing. The lender will request one of its appraisers to assess the value of the property for its financing.
Remember that lender-requested appraisals are for the benefit of the lender before extending home mortgage loan to you. This appraisal may not necessarily reflect the market price of the foreclosure property.
Having a foreclosure appraisal is also a good idea to make sure that you are really buying undervalued foreclosure property with acceptable defects and problems.
More on appraisal…
- Appraisal report and your approach
- Home appraisal methods
- How can you increase the value of your foreclosure?