What is an Appraised Value?
An appraised value is an estimate of the value of a property based on a given time point. The assessment is carried out during the mortgage origination process by a professional appraiser. The appraiser is usually picked by the lender, but the borrower pays for the valuation. The appraised value may not equate to the market value of an asset or land.
Understanding Appraised Values
A home's appraised value is an important factor in the process of loan underwriting and plays a role in determining how much money can be borrowed and under what terms.
For instance, the ratio of the loan to value (LTV) is based on the value appraised. In general, the lender would allow the borrower to buy private mortgage insurance if the LTV is greater than 80%. Upon a new review, if the LTV decreases to 78 per cent, private mortgage insurance premiums can be reduced.
The Role Appraised Value Takes in Real Estate
A property's appraised value may vary from the market value and even from a negotiated purchase price for a home. The market value for a house is the price consumers are willing to pay to buy real property.
For example, a buyer could be offering Rs.22,50,000 for a home that the seller was selling at $24,00,000. This could result in some negotiations between the seller and buyers with a possible compromise price.
Those price levels could still vary from the estimated value that will be used by the lender to decide how much funding will be approved for the purchase. Factors that can affect a piece of property's assessed value include its curb appeal, any infrastructure problems that need to be resolved, equivalent selling prices for adjacent properties, and local crime rates. Proximity to features less than ideal could have a detrimental effect on the value appraised.
