Education is one of the first steps of buying your first home in Arkansas. As you brush up on home buying tips, learn how to read an appraisal and gain detailed insights into a house’s value.
An appraisal is a crucial part of the process when buying your first home because it offers expert insight into what a house is worth. Receiving this report from an appraiser who knows how to evaluate a house’s value allows you and your mortgage lender to determine how much money you need to borrow.
Understanding how to read an appraisal and interpret its results is one of the most overlooked home buying tips; it can mean the difference between a sound real estate investment and a sale that falls through. The following points will help you appraise an appraisal and decide whether to turn a house into your first Arkansas home.
Recognize Outside Factors
There are numerous factors that must be considered when evaluating the value of a house. Demand and the values of other houses in the neighborhood are two of the most influential outside factors. If many homes are currently flying off the market in the area where you are hoping to buy your first home, the demand is considered high, and this can drive up home values.
The values of nearby homes are known in the appraisal industry as “comps,” and they can also influence a home’s appraised value. You should pay attention to the section of your appraisal report that is dedicated to comps so you can see what information the appraiser used to calculate this factor. Ideally, comps should be based on information from the past six months. Timely data is the better because it more accurately indicates how to evaluate a house’s value at the present moment.
Understand the Value of a High Appraisal
At the end of an appraisal report, you should see a section labeled “estimated market value,” which will reveal the actual value of the home based on the appraiser’s findings. If the appraised value of the home comes in higher than the seller’s sale price, this works in your favor. Buying your first home at a price below market value means you will automatically gain equity as soon as you finalize your home purchase.
Avoid the Drawbacks of a Low Appraisal
If the home appraisal value comes back lower than your agreed upon sale price, you should carefully consider your options. More than likely, your mortgage lender will not let you borrow any more money than the home is worth, so unless you can come up with the difference, the sale could fall through. You may want to consider negotiating a lower price with the seller, who will be open to this option if they are serious about selling the home.
If you believe an appraisal does not accurately evaluate a home’s value, you and the seller could request an appeal. You or your real estate agent can also pay for another report from a qualified Arkansas appraisal company if you feel the original appraiser made an error or missed something important that would increase the value of a home.
If you are buying your first home in Arkansas and have questions about how to evaluate a home’s value, contact Ferstl Valuation Services at 501-313-0641 to schedule an appointment.