Are you having trouble understating the value of potential real estate investment properties? Do you find it complicated to get a proper evaluation of the property’s conditions including necessary repairs and other costs? Well, don’t panic just yet; this is a common concern amongst real estate investors. The process of understanding how much a property should cost in the current market requires extensive experience in and knowledge of the real estate market. This is where the process of home appraisal comes in, which is a service provided by a professional appraiser to give you a fair valuation of the property you wish to purchase.
Home appraisal is basically an unbiased evaluation of the fair market value or price of a certain real estate property. The process is used to ensure that the buyer is not paying a higher value than what the property is with in the current housing market. Valuations of properties of course are changeable. The real estate market situation in a specific location can be a factor in raising or lowering the valuation price of an investment.
Property buyers who are making their purchase through a lender or a mortgage payment from a bank usually undergo home appraisal processes. For lenders, the process gives assurance that they are not giving the borrower more money than what the property is worth. A home appraisal for lenders is about giving a correct valuation of the property’s condition, location, and its features or amenities.
Now, it is understandable why buying through a lender would require a home appraisal to valuate the property. But if the buyer is interested in purchasing a property fully in cash, does that mean that a home appraisal is no longer needed? Technically no, a buyer wouldn’t “need” a home appraiser to buy a property if he/she has the capital to make the purchase. However, it is extremely recommended that you go through a home appraisal regardless of whether you are purchasing the real estate property with cash money or a loan.
Why Do You Need a Home Appraisal If Paying Fully in Cash?
1. To Avoid Paying Over the Odds
When you are willing to invest in real estate, you will notice that buyers, sellers, and the entire network of real estate players are all trying to maximize their profits. This is why real estate investors who are selling their rental properties will be trying to get the most money out of you for their listed property. There is two ways to approach buying a property without paying over the odds.
The first option, you get invested in learning about property valuations in the locations you are purchasing, which would require extensive experience in real estate investing and in how negotiating works. You will also need to understand the conditions of the property for sale, the repairs needed, and any other problems to get the proper valuation. The second option, you hire the services of a professional to do a home appraisal for the property you are interested in purchasing. The service would cost some money, but the final valuation of the appraiser could possibly save you a lot of money to help you negotiate a deal.
For example, you might be interested in a real estate property that has an asking price of $250,000, but the appraiser after inspecting the location and the condition gives the property a fair valuation of $200,000. This means that you would’ve paid $50,000 more for an overpriced property. A home appraisal is a process that protects your interests even if you have no lender hovering over your shoulders.
2. A Strong Negotiating Tool
Think of a home appraisal as a leverage technique on your part to get a lower price from the seller if he/she is overpricing the property for sale. The most difficult part of purchasing properties for many investors, especially the beginners in real estate, is negotiating with real estate agents or homeowners. The process can be long and time consuming if you are not used to it, and if you don’t know how to properly valuate a property by yourself.
Hire an appraiser to give you a full report on the valuation of the property and use that report to strong-arm the seller into giving you a better price because of the fair market value. Sellers also want to make profit on their sales, so this is where negotiations can take place. If the seller is insistent on the asking price, then you can try to meet him/her halfway to get a possible discounted price to leave all parties satisfied with the deal.
3. You’re An Out of Town Buyer
This is probably one of the main reasons why cash paying property investors hire home appraisal services. When you are an out of town real estate investor, you are not really familiar with property valuations and prices locally, which would make it difficult for you to get the best deal possible on your own. Hiring an appraiser has helped many out of town investors to get an accurate evaluation of potential properties. We have read so many examples about sellers using out of town investors to crank up their profits by overpricing their properties. This is a common occurrence, so you better be prepared to avoid it if you are investing outside of your area.
Purchasing a house by paying its price in cash gives you more freedom in deciding on your own investment opportunities and how to manage them. However, there is no denying that getting a home appraisal on a potential property is just the safest choice there is. The price of hiring an appraiser is $500 on average. That is a pretty cheap price to pay if it can result in saving you some serious money before signing the purchase contract. The money you have saved up is hard earned, and it should be properly spent on a property that equals its price. Do the right thing and get the property evaluated before you do anything else.