As a private lender, you need to remain protected. With more and more homebuyer turning to private lenders, it’s necessary to use a good licensed appraiser to minimize your risk. Even lenders working with commercial properties should engage the services of a professional appraiser in Toronto, Oakville, or Mississauga. There are many good reasons for private lenders to use an appraiser before approving a loan. Whether you’re working with a home buyer or someone purchasing a commercial property, your appraiser offers a very important service. Let’s look at some of the ways an appraiser becomes your eyes and ears.
5 Ways a Residential Home and Commercial Appraiser Protects You
1. Assesses the Property Value
Of course, the main thing a residential home appraiser in Toronto or a commercial appraiser in Oakville will do is assess the property value. As a private lender, you need a solid property value to work with to ensure the loan is well secured. The last thing you want to do is approved a loan based on an inflated value. When you hire a good licensed appraiser, you get an unbiased professional opinion you can trust. They will assess the value based on comparable properties and other factors to ensure you have an accurate property value to work with.
2. Checks the Condition of the Property
While an appraisal isn’t a property inspection your appraiser will check the condition of the major systems and the structure of the home. These factor into the overall value and must be inspected by an appraiser to provide a full report.
Your appraiser will note the age of the roof and HVAC system, along with any issues with major systems or with the structure. If there’s a crack in the foundation, your appraiser will likely note this.
Since a good residential home appraiser will check the major systems and the structures of the home or commercial property, you will know the condition before approving the loan. If the property has major issues, you can make a more qualified lending decision based on those issues.
However, it’s important to note, a professional appraisal isn’t a substitute for a home or property inspection. You should still have a professional inspect the property to provide further protection from approving a loan on a property with issues.
3. Help Set the Terms of the Loan
An appraisal allows you, as the private lender, to better set the terms of the loan. Before you finalize and close on financing for a home or a commercial property, you need to know the fair market value. An appraisal will give you just that.
As you study the appraisal report, you will notice the fair market value and the condition of the property. This allows you, as the lender, to adjust the terms of the loan accordingly. Maybe you need to require more money down. Maybe it’s important to provide a loan large enough for a few specific renovations or repairs.
Whatever type of loan you plan to offer, with a professional appraisal, you’ll be able to better define the terms. This lowers your risk and helps to ensure you will make a loan you can collect on over the years.
4. Provides One of Your Points of Value
As a private lender, you should get multiple points of value before finalizing the terms of a loan. There are several options here including the Personal Drive-By or “driving the comps” method. This is basically a quick look at the sold comparable properties to determine value.
Another point of value is a Broker Price Opinion or BPO. This point of value allows a real estate broker to assess the value for you.
While both of these points of value are helpful, a residential home appraiser in Mississauga or Oakville will provide the best point of value for a private lender. Once you have an appraisal, you can also use an Appraisal Review as a second point of value for the loan.
An appraisal review allows you to pay another appraiser to review the original appraisal. They will be able to provide their opinion and let you know if they agree with the value or if they would make an adjustment.
As a private lender, it’s important to ensure you’re making a good loan. Using two or more of these points of value is just smart business. It’s always a good idea to use a professional licensed appraiser as your main point of value and the other options as a way to confirm the appraised value.
5. An Appraisal Determines More than Just Property Value
While the main goal of any appraisal, whether residential or commercial, is to determine the fair market value of the property, an appraisal shows you much more. It will look at the location, access, parking, land, and other aspects of the property to help determine the value.
Real estate is all about location, location, location. If the location of the property isn’t great, it will likely have a negative impact on the property. However, if the home or commercial property is found in a nice neighborhood, it will likely provide a bump in value due to a desirable location.
With commercial properties, it’s important to know the type of access provides, along with the parking available. These factors, along with the location, make a difference for the success of the business planning to operate from the property.
While a licensed appraiser in Toronto will certainly assess the value of the property, you will get much more than just a number to work with for the loan. You’ll better understand the location, the access, and several other factors you might want to consider before finalizing the loan.
Private lenders need the right team around them to ensure they make good loans for homes and commercial properties. With the help of a residential home and commercial appraiser in Oakville or Toronto, you can make solid loans and reap the benefits.