Bank Owned Home Appraisal
When purchasing a bank owned home, your lender will require that you obtain a home appraisal in order to determine the value of the property. The appraiser determines the home value estimate by looking at a variety of factors including the current real estate market, neighborhood, and the price of other, similar homes on the market. This information is used by the lender to ensure that the value of the home is more than (or comparable to) the amount being requested by the homebuyer or investor.
In short, the home appraisal process is designed to protect both the homebuyer and the lender.
The Major Types of Appraisals and Which is Preferred
When it comes to determining the value of your property, there are basically three types of appraisals: Broker’s Price Option (BPO), Automatic Valuation Model (AVM), and real estate.
BPO and AVM can provide you with an estimated value; however, a licensed real estate appraiser does not provide these values. So, most lenders require a real estate appraisal by a licensed individual or company. This type of appraiser will include not only current market conditions but also the condition of the property (which may increase or decrease the value of the home).
What Is included in a Bank Owned Home Real Estate Appraisal?
Now that you understand that this process determines the home appraisal value, you are more than likely wondering what is included and how much it costs. When a real estate appraiser examines your property to determine the value, he or she will look at the condition of the home, a comparison of the house values of nearby homes, and the surrounding area (neighborhood).
Furthermore, the home appraisal cost includes everything from an explanation of how the value of the property was determined and a description of the home to a detailed report of any notable findings.
Who Pays for the Home Appraisal - Buyer or Bank?
When it comes to the appraisal process, there typically is not a way to get a free home appraisal and therefore the next question is often “who pays?” Regardless of which type of property (even a REO) you’re buying, the buyer is almost always responsible for these costs.
How to Order a Home Appraisal
One of the best ways to order an appraisal is to rely on your real estate agent to provide you with referrals that specialize in these services. In fact, more often than not your realtor will even order it for you.
Additionally, you can ask the lender you’re using to finance the property to provide you with recommendations for an appraiser. Most banks have a list of individuals and companies that provide these services and can easily provide you with this information.
Once you have a list, you can contact each company and then compare and contrast the prices until you find the right fit. Scheduling the appraisal is as simple as setting up an appointment for them to come out and take a look at your home. They will provide you with the reports once they have had time to compile the information into a document.
At the end of the day, appraisals are used to help the lender determine the value of the property to ensure that the amount of financing is realistic based upon the estimated home value. More often than not, the lender will require a licensed individual determining this value and providing a detailed report to the lender and the homebuyer. Therefore, BPO, AVM, and “free” reports that can be acquired online are typically not accepted.