Making an offer on a house is both exciting and nerve-wracking. Did you offer enough or even worse, too much? In addition to being a home for your family, will your investment pay off? Offer appraisals provide an independent third-party opinion on the fair market value of a home and ensure that you don’t make a poor financial decision.
Homes don’t have a fixed price tag or value. Similar to stocks, the value changes constantly based on multiple factors. When a homeowner decides to sell, they list an asking price for the property. Potential buyers can make an offer at asking price or at a lower price point. What the home eventually sells for may not reflect its value. It also may not reflect its original cost or replacement cost.
Fair Market Value
Price is simply the amount that someone pays for something. While cost and price do not determine a home’s value, they can affect it. An appraisal is an opinion or estimate regarding the value of a particular property as of a specific date. The goal of an appraisal is to determine a property’s fair market value – the most likely price that the property will bring in a competitive and open market. The price at which property actually sells, referred to as market price, may not always reflect the market value.
Two Other Types of Value
Often, value refers to “fair market value” as described above. Other buying and sale scenarios deal with two additional types of value:
Liquidation value estimates what price a property would bring at auction, such as through foreclosure or bankruptcy. Liquidation value is nearly always lower than fair market value.
Value-in-use is the value of a specific use of a property to a specific owner. For example, if a property is used as a vacation rental property, its value-in-use is based on the rental revenue. Obviously, this may be different from the fair market value that a homebuyer would be willing to pay.
Offer Appraisals for Buyers
An independent third-party opinion on the fair market value of a home is an invaluable tool when purchasing a house. Sometimes your bank will give you an appraisal waver which means that they are not requiring an appraisal on the home that you are purchasing. While this may seem like an attractive offer since it saves you money in the short term, it may result in you making a poor financial decision. Offer appraisals make sure that you have all the information that you need to make the best decision for you and your family. Order an offer appraisal today from Stafford Appraisals to start the process.