When Is an Appraisal Done on a Property?

Property appraisals are professional, unbiased estimates of a property’s market value. These valuations provide an informed assessment for various financial and legal processes, offering an important perspective on a property’s worth.

Appraisals in Real Estate Transactions

Appraisals play a role in real estate transactions, particularly when purchasing, selling, or refinancing property. When buying a home with a mortgage, the appraisal takes place after a purchase agreement is signed and the buyer applies for the loan. This step is a requirement from the lender and occurs before final loan approval and closing.

When a homeowner seeks to refinance an existing mortgage, an appraisal is also required. The timing mirrors that of a home purchase, with the appraisal occurring after the refinance application is submitted and before the new loan is approved. This ensures the property provides sufficient collateral for the new financing.

In private sales where no lender is involved, an appraisal can be conducted at any point by either the buyer or the seller. This flexibility allows parties to establish a fair market value for negotiation. Such an appraisal helps inform both sides of a reasonable price.

Appraisals for Legal and Financial Matters

Property appraisals are also performed in various legal and financial planning contexts. For estate planning and probate, appraisals are done after an individual’s death. This is necessary to accurately value assets for inheritance purposes, to calculate potential estate taxes, or to facilitate the equitable distribution of property among heirs.

During divorce proceedings, appraisals of marital property are frequently conducted. This valuation helps ensure an equitable division of assets between spouses, providing an objective measure of the property’s worth. The appraisal offers a basis for fair settlement discussions or court decisions regarding property distribution.

When appealing property tax assessments, an appraisal is commissioned before filing the appeal. This provides documented evidence to support the claim that the assessed value of the property is higher than its actual market value. The independent valuation can be a key component in a property owner’s argument to reduce their tax burden.

Appraisals for Insurance and Specialized Needs

Appraisals serve purposes beyond typical real estate transactions, including insurance and specialized valuations. An appraisal is conducted after a property sustains damage from events like fire or flood. This assessment helps determine the extent of the loss and the property’s value for insurance claim purposes.

For new construction projects, appraisals occur at different stages of development. An initial appraisal is done before construction begins to value the land and secure a construction loan. Subsequent appraisals take place during construction to release draw payments, and a final appraisal is performed after completion for the permanent mortgage.

Investors seek appraisals for strategic investment purposes. These are performed before purchasing a property to assess its true market value and potential return on investment. Investors also commission periodic appraisals to monitor the performance of their assets and make informed portfolio decisions.