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Know What to Look for in a Home Appraisal and Avoid Becoming Confused

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By : marco benavides    99 or more times read
If you want to avoid becoming confused by the many terms you are hearing, you should know what to look for in your home appraisal. The first thing to do is to get the terms straight in your mind, so that you may know what each of them means. Simply stated, a home appraisal is conducted to establish the price at which a property is likely to sell for in a competitive, open market, or the property's market value.

This is where first-time home buyers become confused and think that home value is the same as asking price, and that asking price is the price at which the home will sell for. Well, all three prices may be different, and they are established in separate ways, so be aware of this fact. Asking price is what the owner is hoping to get for the property he/she is selling, market value or appraisal value is what an objective third party is supposed to determine the property is worth in the current market, and selling price is what a particular buyer will finally pay for the home.

The seller's real estate agent will do a Comparative Market Analysis in order to determine a realistic asking price for the owner. This CMA may not be too far off from the appraisal, especially if the real estate agent is experienced in these matters. On the other hand, you should not confuse CMAs with appraisals because appraisals are actually much more detailed reports of the property in question.

The appraiser's report will contain a lot of information, including any flaws or problems that the appraiser believes will affect the value of the property. This is especially important to look for because the report may list some serious problems with the property. If the report states that the foundation is sinking or crumbling, it may be time for you to look for another property or negotiate the price with the owner.

No matter how detailed the appraiser's report may be, do not confuse the report with a home inspection, and do not neglect to have an inspection done, even if the appraiser finds no major flaws or problems. The home inspector is a professional, and he/she will look at things that the appraiser may not pay much attention to, and which may turn out to be major problems.

Therefore, you should still go ahead and have an inspection conducted, and do not forget to make the purchase of the home contingent on the home inspection. In any event, costs for the home appraisal will be among the closing costs that you will be responsible for. On a $250,000 home, the cost of the appraisal will be anywhere from $250 to $350, and the most commonly used appraisal report accepted by mortgage lenders is the URAR or Uniform Residential Appraisal Report.

There are many more things involved in an appraisal, but the above are some things that you should know so that you can avoid confusion. After all, home buying is already confusing enough, and it is especially confusing when so many different terms are being used.
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