Reasons For An Appraisal

Real Estate Appraisals can be used for a variety of reasons. The most common reasons for Real Estate Appraisals are for Real Estate purchases, refinances, Estate purposes, PMI removal, Divorce, Bankruptcy or Fair Market value.

Most lenders require an appraisal for the purchase of a home. The purpose of this type of appraisal is for the lender it to determine if the negotiated sales price is supported by the sales or comparable sales within the area. This is typically done to protect the lenders investment in the loan the buyer it applying for.

Most lenders also require an appraisal for a refinance. There are several types of refinances. The most common recently has been to refinance the interest rate on a loan which typically lowers the owners/borrowers payment monthly. Refinancing can also be done to take equity out of a house which is cash out refinance. Another reason for an appraisal done by the bank would be for a line of credit which is not a refinance but allows the owner to use the equity in their home as a line of credit instead of taking cash out.

An appraisal for PMI removal is done when a borrower has a loan to value which is greater than 20% of the equity in the home. The banks require borrowers to take out Primary mortgage insurance, PMI, when they get loans with less than 20% to put down on the property. Once the equity in the property is 20% or greater an owner can request to remove the PMI. This is typically done by providing a Real Estate Appraisal to the bank showing the current fair market value would indicate the equity to be greater than 20% of their loan to value.

Estate Appraisals can be done for a number of reasons as well. A CPA or Real Estate Attorney would want an appraisal done as of the date of death or six months after the date of death for capital gains. The appraisal would be done for the IRS to show the value of the house for tax purposes.  An appraisal could also be done for Estate purposes if the property was left to more than one heir. An appraisal in this case could be used to determine fair market value for the sale or if one or more persons wants to purchase the property from the others.

An appraisal could also be used for the same purposes as stated above for a divorce.

Bankruptcy appraisals are done to determine fair market value of the property. This is typically done to determine what equity there is in the property when determine a person’s ability to pay their debts.

Fair Market Values appraisals are done for many reasons. The most common reasons for an individual person to want a Fair Market value appraisal is someone who is paying cash for a property.  The appraisal is done to make sure the market price is in line with the market value of the property.