Homebuyers are required to get an appraisal of the house before applying for a mortgage because lenders need to know if the value of the house matches the amount of the mortgage. This is the most common time that a home appraisal is necessary. However, there are several other situations where you might need an appraisal.
Finances can be stressful, and when your house is involved, it’s even more stressful. Home appraisers can help to alleviate that stress in many situations.
Home Appraising Group, a small team of home appraisers in Philadelphia, says, “…a homeowner can hire an appraiser for a multitude of reasons including tax challenging, estate planning, and home improvement post-valuation.” In this post, we will discuss some more reasons you might need to hire a home appraiser.
5 Situations Where You May Want A Home Appraisal
1. When Applying for Loans
There are several loans that might require a home appraisal. The most common is a home equity loan. A home equity loan is an additional loan added to your mortgage.
Your loan will be calculated by subtracting the remaining value of your mortgage from the value of your home. If your appraisal shows that your home has decreased in value, you might not qualify for the loan.
Other loans might require your house as collateral. A cash or business loan will sometimes ask for this, depending on the value of the loan.
The bank needs to know how much your house is worth so they can decide how much to lend you. Keep in mind that you can lose your house if you default on the loan.
2. When Refinancing Your Home
In order to refinance your home, its value must increase over time. The only way to get this information is to have your home appraised.
Refinancing means that you’re replacing your mortgage with a new one. This is supposed to save you money and help you pay off the loan quicker.
However, if the value of your home has decreased, you could end up stuck with the original mortgage. Either way, it’s better to be armed with the knowledge so you can plan for the future.
3. During a Divorce or Estate Settlement
Splitting assets during a divorce is best done by an impartial third party. When it comes time to make decisions about the house, a professional home appraiser can be that impartial person for you.
Don’t keep family disagreements in the family. When it comes to big issues, get someone to settle them for you.
An appraisal will also be needed to split your home’s value among your potentially bickering family members when you pass and will be necessary for your final tax return. The value will either be decided as of the date of your passing or the date of the appraisal.
4. When Filing for Bankruptcy
When you file for bankruptcy, you need to provide the court with the value of all of your assets, including your home. This includes any real estate you own.
It also includes all of your personal property, whether it’s in your home or not. Very few things are exempt from liquidation, and each state has different laws about what is exempt. Assets you receive after filing can even be liquidated.
In the case of bankruptcy, you might actually want your home’s value to be lower than expected. Your odds of losing your home increase if there is enough equity for the lender to make. Less value means less equity.
5. Before Selling Your House
As mentioned above, the buyer has to pay for an appraisal before getting a mortgage for the house. However, it can be beneficial for the seller to appraise the house as well.
Having your home professionally appraised helps you sell your home faster by providing you with the most accurate value of your home possible. You can make a guess based on other homes in the area, but it likely won’t be accurate.
Your realtor might also be able to take a guess at a value. However, both you and your realtor are biased because you both want to maximize the value. If a realtor lists it too high, it can take a long time to sell, and if you list it too low, you could lose out on a lot of money.
As you can see, there are many reasons you might need a home appraiser. There’s a good chance your home is your most expensive asset, and it’s in your best interest to know exactly how much it’s worth before making big decisions about it.
Are you currently going through any of these life-changing events? How different was the actual value of your house from your expectations? Let us know in the comments below!
Jennifer Bell is a freelance writer, blogger, dog-enthusiast and avid beachgoer operating out of Southern New Jersey.