A real estate appraiser determines the market value of a property, which is important for mortgage lenders to ensure the property is worth the loan amount. Appraisers use two methods to determine value and must be licensed and unbiased.
A real estate appraiser is an individual who assesses the market value of real estate. Market value is an estimate of what the home could reasonably sell if put on the market. A mortgage lender will typically request a property valuation during the home loan process to determine an exact value of the property for which a mortgage loan is being requested.
When a mortgage loan is originated, the property serves as collateral for the loan. If the borrower defaults on the loan, the lender would sell the home to recover some or all of the money originally borrowed. Therefore, a lender will use an appraisal to ensure that the property is at least worth the loan amount.
For example, if a person is buying a home for $100,000 (US$) and needs a $100,000 mortgage loan to buy the home, the lender will use a real estate appraiser to determine whether or not the home is worth at least $100,000. $100,000. If the property has a value equal to or greater than the loan amount, the home loan will normally be approved and originated, provided all other underwriting requirements are met. If a real estate appraiser determines that the value of a home is less than the desired loan, the loan may not be approved unless specific conditions are met. This makes property valuation an important and critical element of the home loan process.
Appraisers generally use two different methods to determine a home’s value. The first method compares the property in question to recent sales prices for comparable homes in the area. The second method is primarily used for new construction where there is no reliable or consistent record of comparable sales in the area. Using this method, the real estate appraiser determines the replacement cost of the property in question if it is destroyed.
A real estate appraiser may work for the mortgage lender, an affiliated company, or may be a separate, independent third party. Regardless of whether or not the appraiser works for the mortgage lender or is independent, it is important that the appraiser is an individual who has no personal interest in the mortgage loan or the subject property being appraised. It is also essential that the appraiser provide an objective and unbiased estimate of the value of the property in question. Individual borrowers can also use a real estate appraiser of their choice, although the appraisal usually needs to be reviewed and approved by the lender.
A real estate appraiser is licensed and certified as per the requirements normally set by the local government. While the time required to become an appraiser can vary, an individual who wants to become a real estate appraiser should plan for at least two years of education before meeting the requirements to sit the certification exam. Once the certification process is completed, the candidate can work as an assessor.
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