You have found your next Westfield home! Congratulations. As a condition of final loan approval, you need to have an appraisal done. Unless you provide an all-cash offer, banks require a professional home appraisal. You should know how a home appraisal works for Westfield, Cranford and Mountainside Buyers so you are a more informed consumer.
How a Home Appraisal Works for Westfield Area Buyers
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As the majority investor in your home, the bank needs to know what it is worth before they are willing to lend you money to buy it. That’s when the professional appraiser is called. The home will be compared to properties in the neighborhood that are similar in condition, amenities, size and other aspects. The appraiser seeks the most proximitous, most recent, most similar sales possible for the comparison. All this information is gathered together to determine the home’s estimated market value.
The report and conclusion then get passed along to the bank. The bank utilizes this info to help decide whether or not the real loan to value ratio is favorable or more so than the one for which you applied. For instance, if you applied for an 80% mortgage with 20% down and the appraisal is below the sale price, the bank will only want to lend you 80% of the appraised value. If it is too low, either the Seller will need to come down in price or the Buyer will have to come up with more money to maintain the ratio.
Who Chooses the Appraiser?
In New Jersey, there is a statutory training, examination and licensing procedure in order to qualify to perform bank appraisals. Appraisers are further required to maintain continuing education on a schedule.
Mandated by reforms created after the housing bubble burst in 2007, the selection is anonymized. Banks must work with an appraisal management company. Neither you, your agent nor the bank will influence the choice of appraiser. This helps keep the appraisal neutral instead of weighted one way or another.
The hiccup in this system is that appraisers have differing levels of acquaintance with unique and powerful location factors influencing market value in Westfield, Cranford and Mountainside. The good news is that appraisers arrange access to the home through Realtors. These Realtors have a chance to spotlight such factors, as well as price trends and market temperature that may help the appraiser make a more localized valuation.
Talk to your Westfield REALTOR® to learn more about how a home appraisal works for Westfield Area Buyers.
Scott Gleason, CRS at Coldwell Banker Realty – East, NJ Luxury Homes