First Time Homebuyer Real Estate Word is Appraisal
On a rerun of the TV game show, Cash Cab, a carload of New Yorkers were stumped when asked to define the acronym, FSBO. This is a term often used in real estate to describe people who sell their home without an agent or "For Sale By Owner". As a REALTOR® I was a bit surprised they couldn't come up with the correct answer but then I remembered of all the times a look of confusion came over a buyer’s face when I mentioned escrow funds and earnest money. These terms sound so much alike when being bombarded with new terminology like, mortgage, deed, easement, appraisal, and association dues, etc. It is understandable that a buyer who is more interested in room sizes and kitchen counters to be confused with the everyday real estate jargon like down payment or cash to close. Buyer confusion is totally understandable because most people will only buy a home once or twice in a lifetime.
FSBO is only one of many terms that could possibly confuse a First Time Homebuyer. So I thought a glossary of real estate terms might be helpful. From time to time I present terms often used by REALTORS® in a series of posts for the first time homebuyer with explanations. This way you can skip buying that big “how to buy a house” book or attending that First Time Homebuyer Class and have a quick resource at your fingertips. I am continuing the series with Today’s Real Estate Term:
Appraisal An appraisal is the process of assessing a value to a parcel of real estate. A real estate appraiser is an independent 3rd party who will assess the property and prepare a valuation report. This is most often ordered by the buyer’s lender and paid for by the home buyer to verify the amount the buyer is requesting for the mortgage is not more than the current value of the home. The appraiser will try to find three to six comparable homes that have been sold in the last few months to compare to the subject home. The process involves comparing the size, structure, age and features of the subject home/land to the comparable sold homes to determine an appraised value.
An appraisal is similar to a market analysis performed by a real estate agent but it does differ in several key ways. A real estate agent does a market analysis at the request of a seller to determine the best price to list a home. It will take into account homes that are currently listed for sale but an appraisal will not. Appraisers are often licensed and trained to do a precise, detailed value analysis while the market comparison done by a real estate agent is used to determine a price. While an appraiser will charge a fee of several hundred dollars to appraise a property, most real estate agents do not charge a fee to provide a market analysis of a home. A market analysis can be a cost effective way for a homeowner to get value of their home if offered for sale but this document is not acceptable to verify value for a mortgage.
Additional Terms in the Real Estate Glossary:
- BUYER’S AGENT
- DEEDED ACCESS
- DUAL AGENT
- EQUITY
- ESCROW
- EARNEST MONEY
- EASEMENT
- ENCROACHMENT
- FIDUCIARY
- TITLE INSURANCE
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