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Little Rock Home Appraisal ... All the Facts You Need to Know.



When you apply for a home loan, most Little Rock mortgage companies will require a Little Rock home appraisal. They just want to make sure the value of the home will be enough to repay the loan if you default.

A residential real estate appraisal is used as a tool to help establish the fair market value of a property.

An appraisal is not the same as a comparative market analysis(CMA). A CMA would be used by a Little Rock Realtor to help a home seller determine a fair selling price for their house in the current market. Unlike a CMA, a Little Rock home appraisal would be much more detailed - and is the only type of property valuation report a bank will accept.

Facts About Real Estate Appraisers and Appraisals

Real estate appraisers in Arkansas are licensed after completing a required number of hours of course work, an internship with an experienced appraiser, and successfully passing the licensing exam. This process takes about 2 years.

Your mortgage lender may use an appraiser on staff or contract with an independent Little Rock home appraisal specialist. If you are allowed to pick the appraiser, make sure it's someone familiar to the mortgage company, or the results may be subject to a review.

Above all, the appraiser should be a neutral third party with no connection, financial or otherwise, to anyone involved in the transaction.

Subject property is the name given to the property being appraised.

You will probably pay for your Little Rock home appraisal when you apply for your home loan.

Appraisal Methods

Residential property is normally appraised one of two ways.

Sales Comparison - The subject properties value will be estimated by comparing it to similar properties that have recently sold in the same area. The properties used for the comparison are known as comps.

The appraiser will have to make paperwork adjustments to the comps so their features are more in line with those of the subject property. The resulting figure will be closer to what the comps would have sold for with those some features.

Cost - The cost approach would normally be used for new homes where the costs to build are well known. The appraiser estimates the replacement cost if the structure were destroyed.

Things to Look for on a Little Rock Home Appraisal

  • Details about the subject property along with analysis of 3 comps.
  • An evaluation of the current overall real estate market.
  • Statements about things the appraiser thinks could devalue the property.
  • Notations about serious flaws like a cracked foundation.
  • An estimate of the average sales time for the home.
  • The type of area the house is in (development, stand alone acreage, etc.)


What an Appraisal Should Not be used For.

A residential home appraisal should never used as a home inspection report. Even though appraisers make notes about obvious problems they see, they're not home inspectors. Don't use an appraisal to decide the condition of a house.

What does a Little Rock Home Appraisal Mean to You?

Your final mortgage loan commitment usually depends on a favorable appraisal. The home lender wants to make sure they can recover their money if you default on the home loan.

If the appraisal is lower than the sales price, the loan could be declined.

Problems with the subject property may have been noted by the appraiser which could cause the lender to require extra documentation. An example would be a mortgage company requiring a signed private road maintenance agreement, verifying that maintenance costs are shared by everyone who uses the road.

Your lender will go over the appraisal carefully before deciding if the subject property qualifies as security for your home loan.

Things You Can Do if Your Appraisal is Low.

The first thing to do is stay calm and don't panic. The buyer and seller both have some options that could still make the sale go through. Let's look at the list.

1. The buyer can make up the difference in cash. If an appraisal is below the selling price, it doesn't mean the lender won't loan any money. It just means they won't give you enough to meet the seller's price. If you have enough cash to make up the difference - problem solved!

2. The seller can lower the price. If the house was priced a little high, this is usually the best solution for everyone involved.

3. The seller can carry a second mortgage for the difference. The buyer can make payments directly to the seller to make up the difference between the selling price and loan amount.

4. Order a second appraisal. If you think mistakes were made on the first appraisal, you can order a second one. The buyer or seller can pay for the second appraisal.

5. Supply a list of comparable sales that justify the agreed on sales price. Then ask your lender for a review of the appraisal.

6. Cancel the transaction. If your purchase contract contains a properly written loan contingency, you may be able to cancel the contract. The seller would then be required to release your earnest money deposit.

Just remember that most problems are correctable. Try to stay calm and work through one issue at a time.


Related Links:

Little Rock Homes Guide.

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