In today’s real estate market banks have a difficult time confirming the value of the homes they are financing, and consequently buyers have a hard time getting the money they need to buy their homes. To avoid the confusion on the price of a home, banks hire a third party assessment of a homes value, called an appraisal.
In an appreciating market appraisals are relatively easy because appreciation cushions the bank, so if they have to take it back it has most likely increased in value. This would bring ready buyers and the banks would not have to hold it before they could liquidate it. In a depreciating market, conversely, the bank may have to hold the home in their REO inventory for quite some time before they can sell it, making an accurate appraisal all the more important.
Any can be trained to be an appraiser but there are many certifications for different kinds of appraisers. Most people are familiar with residential real estate, but there are certifications for land appraisers, commercial appraiser and even industrial appraiser as well.
The party responsible for hiring the appraiser is the bank, but the buyer typically ends up paying for the appraisal in most cases.
The frightening side of an appraisal is when there is a willing and able buyer, but the appraiser says the property is not worth the asking price. At that point there is really only one thing that can happen to salvage the purchase and that is for the seller to reduce the asking price.
Although many home buyers do not like the fact that they are subsidizing the banks investment by paying for an appraisal, there really id not a good way around it. Until we find a better solution for establishing valuations for real estate, we are likely to continue to have to deal with appraisals for a long time.
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