About the Appraisal Process – by the Cin-Day Group

Whether you’re buying or selling a home in Greater Cincinnati and Dayton, the appraisal is one of the most important steps in the process. It determines a home’s fair market value and can directly impact financing, negotiations, and even the final sale price. In this post, the Cin-Day Group breaks down what you need to know about the appraisal process and how to prepare.

Appraisals help guide mortgage terms.
The appraised value of a home is an important factor in the loan underwriting process. Although lenders may use the sale price to determine the amount of the mortgage they will offer, they generally only do so when the property is sold for less than the appraisal amount. Also, the loan-to-value ratio is based on the appraised value and helps lenders figure out how much money may be borrowed to purchase the property and under what terms. If the LTV is high, the lender is more likely to require the borrower to purchase private mortgage insurance. 

Appraised value is not a concrete number.
Appraisals provide a professional opinion of value, but they aren’t an exact science. Appraisals may differ quite a bit depending on when they’re done and who’s doing them. Changes in market conditions also can dramatically alter appraised value.

Appraised value doesn’t represent the whole picture of home prices.
There are special considerations that appraised value doesn’t take into account, such as the need to sell rapidly.

Appraisers use data from the recent past.
Appraisals are often considered somewhat backward looking, because they use sold data from comparable properties (often nicknamed “comps”) to help come up with a reasonable price.

There are uses for appraised value outside of the purchase process.
For selling purposes, appraisals are usually used to determine market value or factor into the pricing equation. But other appraisals are used to determine insurance value, replacement value, and assessed value for property tax purposes.

The appraisal may feel like a behind-the-scenes step, but it can make a big difference in how smoothly your transaction moves forward. By understanding how it works—and preparing your home in advance—you’ll be in the best position for success. Have questions about appraisals or the selling process in  the Cincinnati/Dayton market? The Cin-Day Group is here to guide you every step of the way.