If your home has been damaged in a fire, obtaining fire damage home appraisals is essential for insurance claims, tax benefits, or selling. This appraisal quantifies the property’s loss in value, ensuring you receive appropriate compensation or set a justified asking price if you are selling a fire-damaged house.
During home appraisals, appraisers typically do an “after repaired value” appraisal (ARV) instead of doing a basic “as is” value appraisal. An after repaired value appraisal assesses the value of the property based on what the property’s condition was before the fire damage occurred.
When you receive an after repaired value appraisal, you must provide proof of all repairs and upgrades made to the fire-damaged house. You also need to get this appraisal within 30 days of the fire date to recoup your losses. Coordinate with your insurance agent to ensure proper conduct of the appraisal.
Now let’s take a closer look at home appraisals in general so you can better understand the process as well as the value of the appraisal itself.
What is a Home Appraisal?
A home appraisal is an independent valuation of a home to determine its market value. In general, a home appraisal is organized by a lender and paid for by a buyer. In the case of a fire-damaged house; however, the appraisal may be done for insurance company’s benefit and/or the homeowner’s benefit.
The reason a lender requires an appraisal is that a prospective buyer may think a home is worth more money than it really is – leading him or her to make an offer that may be too high. If the appraiser leads the lender to believe the home is overvalued, the lender may feel this is a risk and may not grant a mortgage.
Basically, lenders want to protect themselves by ensuring the property a person is considering buying with a loan from their institution is worth its market value. The appraisal helps ensure that the buyer does not end up having negative equity on a home.
The Importance of an Appraisal
Getting a home appraised is extremely important, especially for homeowners who are looking into selling a fire-damaged house. As mentioned above, it can help you find out how much a property is worth. It can also help you lower your taxes and eliminate private mortgage insurance.
A licensed appraiser can also help with estate planning, analyzing the feasibility of proposed improvements for a fire-damaged house, determining the best use of a property and with insurance valuations.
The Home Appraisal Process
An appraiser inspects the property to ascertain its true status. He analyzes market data, including historical and current comparable sales, current offers, pending sales, and proposed improvements. This allows him to arrive at an appraised value for the home. The appraiser also compares the property to the broader market. Depending on the purpose of the appraisal, the appraiser might choose to weigh different factors more heavily than others.
In the case of fire damage home appraisals, the appraiser uses a “hypothetical condition” to appraise the value of the home. That basically means that the appraiser considers something as fact for the sake of the analysis even though it is not real. In this particular instance, the appraiser considers the house to be in whatever condition it was before the fire.
In generating his appraisal, an appraiser also pulls information from a wide variety of sources. Sources include local Multiple Listing Services, local real estate professionals, county courthouse records, private data vendors, owner interviews, and his or her own personal knowledge. The individual appraiser weighs the quality and reliability of each piece of information.
The Difference Between a Home Appraisal and Inspection
You must keep in mind that a home appraisal is different than a professional home inspection. An appraiser formulates an opinion of a property’s value. An inspector educates the buyer about the condition of the home and its components.
The Ultimate Value of a Fire Damage House Appraisal
In case of fire damage home appraisals, the appraisal performed by a professionally licensed appraiser is an invaluable tool that allows you to make wise real estate investment and sales decisions.
Common Misconceptions About Home Appraisals
Though most of us undergo a home appraisal at some point in our lives, it is still not something that we experience on a regular basis. As a result, many people are unfamiliar with the complete home appraisal process and may hold several misconceptions about it.
Following are the top seven misconceptions that most people have about the home appraisal process as well as the actual truth for each misconception.
Misconception #1: Appraisers use a specific formula (for example, price per square foot) to figure out exactly how much a home is worth.
Truth: Appraisers consider the home’s location, its closeness to sought-after schools, and access to public facilities crucial in their evaluation. They also assess the lot size, the home’s size and condition, and compare recent sale prices of similar properties to determine value.
Misconception #2: Fire damage home appraisals’ purpose is to ensure that a buyer does not pay too much for a house.
Truth: An appraisal provides valuable information to both the buyer and the seller. The primary purpose of an appraisal is to protect the lender from owning overpriced property.
Misconception#3: There is nothing you can do to improve your home’s valuation.
Truth: The overall maintenance of a home is of primary interest to appraisers. On top of examining the condition of walls, flooring, and floor coverings, they also check the functionality of built-in appliances and ensure the mechanical systems, including plumbing, electrical, heating, and cooling, operate correctly. So keeping a well-maintained home is of vital importance to receiving a good valuation. In addition, a clean, orderly home also signals to an appraiser that it is well-kept, even though good housekeeping isn’t required.
Misconception #4: Anyone can be an appraiser.
Truth: Federal law requires states to establish minimum standards and licensing practices for real estate appraisers.
Misconception #5: Appraisers have no obligation to reveal home defects to buyers.
Truth: If the buyer is applying for a mortgage that insured by the Federal Housing Administration (FHA), the appraiser must survey the physical condition of the home and disclose potential problems to the buyer. No such obligation exists for non-FHA mortgages.
Misconception #6: An appraisal is identical to a home inspection.
Truth: A fire damage home appraisal is not a substitute for a professional home inspection. The appraiser formulates an opinion of the property’s value for the lender. While the inspector educates the buyer about the condition of the home and its major components.
Misconception #7: A home’s assessed value should equal its market value.
Truth: Unreported interior remodeling and long-unassessed nearby properties can significantly affect a home’s assessed value.
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