What is an appraisal?
An appraisal is an opinion on a home’s market value that helps a lender ensure the purchase price is in line with the property value. The process is led by a Registered Valuer by the Royal Institution of Chartered Surveyors—an independent third party engaged by the lender to provide a professional judgment on the home’s value. Appraisers do not represent the buyer or seller; their sole duty is to come up with a fair and accurate valuation of the property.
Do I have to get an appraisal?
If you are taking out a mortgage on your new home, your lender will usually require you to get an appraisal to help establish the “loan-to-value (“LTV”) ratio,” or the percentage of the home’s price that you’ll borrow. Higher LTV ratios are riskier investments for the lender, so generally they look for LTV ratios of 80% or less. If you are paying in cash, an appraisal isn’t required, but it can still be useful to get a third-party opinion to make sure you aren’t overpaying.
What does an appraiser look at?
Different appraisers may take different approaches. By referencing land title registrars office and reaching out to Real Estate professionals to compile home listings in a given market—appraisers can use recently sold properties that have similar characteristics, called “comparables,” to help come up with a reasonable value for your home. They will also look at the home’s condition, recent renovations or improvements, amenities, location, size, and other characteristics. Whatever method an appraiser uses, it must be independent, un-biased, and backed up by evidence.
Do appraisals take place in person?
An appraisal is usually an in-person visit, but it is not always required. In some rare instances, hybrid and desktop appraisals are used where appraisers collect data remotely and speak with reliable third-party sources familiar with the property and surrounding area, such as current or former agents of the comparables being considered.
Is my agent allowed to communicate with the appraiser?
Yes. Your agents and others involved in the transaction are allowed to communicate with the appraiser and provide property information. It is not only unethical, but it is also unlawful for agents to intimidate, persuade, or bribe an appraiser to influence the valuation, and an appraiser may not disclose confidential information at any time.
What happens if the appraised value is different from the purchase price?
A mismatch between a home’s appraised value and the purchase price can impact how much your lender allows you to borrow for your mortgage. You can negotiate to include an appraisal contingency—a condition that the value and purchase price must align in order for the transaction to continue—in your purchase agreement, but an appraisal contingency is not required. You will have a subject to financing in your offer and then added to the sales and purchase agreement. Meaning the agreement is subject to financing. Financing will not be approved if the appraisal is not in line with the purchase amount. You would then have to go back to the seller to renegotiate or have to make up the difference on your own.
Will I receive a copy of the appraisal?
Yes. However, in some cases you might have to put a request for it.
Practices may vary. Consult your real estate professional and/or consult an attorney for details about Bermuda law when you are purchasing a home. This information was provided by NAR and edited for Bermuda Real Estate. For any questions regarding appraisal please contact a Registered Professional.