An appraisal is a process by which the value of a property is determined. Establishing this value is important because it is one of the elements in determining the maximum amount of the mortgage loan. Typically, the appraisal is requested early in the mortgage loan process. The appraisal is carried out by a licensed appraiser who provides his or her services to the financial institution that will process the mortgage loan.
What is taken into consideration when making an appraisal?
To determine the value of a property, different factors are taken into consideration, such as the condition of the property, size of the lot, location, comparable prices of other properties in the area and the requirements of the type of loan, among others.
- Condition of the property– It is very important that the property meets the minimum security requirements, that is, that there is no damage in terms of the structure of the property, such as cracks, leaks and electrical problems, among others. It is crucial that the property is in good condition and livable.
- Land Appraisal– The appraiser requests the property deeds from the owner to confirm the land information. The property is measured when visited and the appraiser corroborates that all the information contained in the deed is correct. Not only is the property evaluated, but the land is also measured and evaluated to see that there is no invasion of the land, from a neighbor towards the property being evaluated or from the evaluated property towards another neighboring land.
- Location– Other elements come into play in an appraisal, such as the location, view and surroundings of the property, that is, proximity to shopping centers, schools, sports areas, public transport and road access, among others.
- Comparable Properties– The appraiser evaluates other properties that have just sold in the area, especially those that are similar in size and location, and compares their sales prices to the property being appraised.
- Structural Improvements– When making an appraisal, structural improvements that have been made to the property, such as extensions and swimming pools, are also taken into consideration.
What should a property owner do before making an appraisal?
Since one of the important factors when appraising a property is its condition, the owner must ensure that the property is in good condition. If there are repairs that need to be done, such as cracks and leaks, these should be done before closing on the loan, as these are part of the minimum security requirements for a property.
It is also recommended that the property be clean, collected and painted. Making these minor repairs to the property can positively impact its value.
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