A real estate appraisal is the process of developing an opinion of value for real property. Appraisals are performed by licensed real estate appraisers.

 

Appraisals differ from Broker Price Opinion (BPO) and Real Estate Valuation in that appraisals can only be performed by licensed real estate appraisers.

 

You can receive a [free real estate valuation estimate](https://www.offermarket.us/tools/free-real-estate-valuation), compliments of OfferMarket.

Real estate appraisal is the process of developing an opinion of value for real property. Appraisals are performed by licensed real estate appraisers.

Appraisal - Real Estate Glossary - OfferMarket

What is a real estate Appraisal?

by Daniela Gonzalez

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/iStock-1038186890.jpg" alt="Three miniature, toy suburban homes on top of a stacks of quarter coins">

Property value has many moving parts, especially for something that itself doesn’t, well, move. The factors involved in determining property and home value are sliding scales of perception, priority, and personality. What is important to some may be a deterrent to others, so coming to a consensus on the value of a property has numerous considerations.

 

## How Is Home Value Determined?

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/lesia-gant-olFlnjzapjk-unsplash.jpg" alt="Arial view of a suburban neighborhood">

 

#### Size

 

This one is pretty straightforward – larger homes are more expensive because building bigger homes is more expensive. Depending on where you live, there is a varying cost per square foot to build a home (this has huge variations across the country based on many factors like availability of building material, contractors, remoteness, terrain, etc.). 

 

#### Age

 

The age of your home can contribute both positively and negatively to your home value. We tend to place a high value on historical or character homes – classic homes from the early 1900s that have been well maintained and upgraded. Conversely, homes from the mid-1900s forward that have not been updated are not seen as having high value. If your house would not fall into the historical or character home category, [renovations and updating](https://www.reverealtors.com/blog/detail/1540/1/High-Value_Renovation_Projects_for_Your_Home) are necessary to maintain home value.

 

#### Location

 

Some location elements are primarily about personal priorities—some people prefer being closer to amenities, downtown cores, schools, nightlife, wilderness, hiking and biking areas, etc. 

 

Other locational elements are less subjective. For example, we can confidently say that most of us would prefer not to live next to a dump or landfill—or a meat processing facility, power generation plant, or fire station. A property nearby could have a beautiful home and exterior landscaping, but we would likely still value it less than the same home in a more picturesque location.

 


#### Features

 

The features of your home and property contribute hugely to its market value. What the term ‘features’ encompasses is vast and also highly personal. Here are some features that contribute to the value of your home and property:

 

- [Home gym](https://porch.com/advice/set-ideal-home-gym-hassle-free-daily-fitness) (including flooring, mirrors, etc.)
- Home theatre room
- Feature fireplace
- Indoor or outdoor water features
- Oversize windows
- Smart home features
- Finished/heated garage

 

#### Safety

 

Neighborhood safety is a significant factor in the value of your property. Not only is it undesirable to consider living in an area with a higher crime rate, but it will likely cost a potential buyer more in the long run too. Home insurance companies factor in the crime rate in your area and the likelihood that you’ll make a claim due to a burglary or property damage and will give you a higher rate if you live in a high crime area.

 


#### Neighborhood

 

You know the ones, the good neighborhoods where everyone wants to live. It might not be because the houses are beautiful and gigantic; maybe it just has a good vibe or many great locally-owned restaurants. Whatever the reason, some neighborhoods are more desirable than others, and just having your home located there can positively impact your property value. 

 

#### Tree Value

 

[Tree value](https://porch.com/advice/much-trees-really-worth) can reference both the trees on your property specifically, as well as the trees on your street in general. Having old and well-cared for trees provides a beautiful natural element to your property that people are drawn to, enough so that it has a noticeable effect on your property values. 

 

#### School District

 

If you have children going to a public school, this is probably something that you’re already keenly aware of. It’s also an excellent example of how priorities are on a sliding scale regarding property value. If you don’t have children, or they attend or will attend a private school, then you’re much less likely to be willing to pay more to be in a desirable school district.

 

## What can decrease my home’s value?

 

#### Crime Rate

 

Many potential buyers are savvy about this these days, and they will check on the crime rates in neighborhoods they’re interested in purchasing in. So not only are those baddies sneaking around and damaging property or stealing bad for you, they’re bad for the overall value of your home now and into the future. 

 

#### Neighborhood

 

Gentrification is a tricky thing when it comes to property value. It relies on an overall increase in property values throughout a neighborhood to bolster the value of individual properties. 

 

Suppose you renovate a home in a less-desirable area with the idea that the neighborhood itself is becoming more gentrified, and that doesn’t happen as quickly as you were hoping (or at all). In that case, you have a property that’s valued is negatively impacted by the general area, not by the characteristics of the home or property itself.

 

#### Location 

 

There’s a good reason for the old “location, location, location” adage that you’ve likely heard many times before—it’s still relevant! So many factors go into what a desirable location is or isn’t, and they can be tricky to navigate. Here are a few of the important ones to consider:

- Cemeteries – generally speaking, very close proximity to a cemetery will work against your home value. 
- Highways – noise from roads is a detractor; while easy access is suitable for property value, it depends on your location.
- Hiking trails – if you’re a hiker, this could be a suitable property feature; however, many people do not prefer to have a reason for multiple strangers to be close to their home year-round. 
- Construction – Construction brings noise, people, dust, and traffic. None of these are suitable for your property value.
- Property history – This can be anything from being in a floodplain to having a violent crime committed on your property at some point. Some states have mandatory disclosure laws about certain things, while others do not, so the impact on your property value will depend on the history and where you live. 

 

## Tips For Avoiding a Low-Value Home 

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/lesia-gant-olFlnjzapjk-unsplash.jpg" alt="tiny home keychain">

 

Be informed – Know what’s happening in your neighborhood and city. It might not be the most scintillating activity, but keeping an eye on your city or town council’s activity and any proposed infrastructure changes or construction permits can be a great way to help you stay ahead of the game. 

 

Economic factors – The state of your local and national economy are one of the biggest drivers in real estate pricing. You could have an adorable home with perfect curb appeal, but your property will be valued less if you try to sell in a down economy. 

 

Building regulations – This is a significant factor if you’ve made any additions to your home. Most municipalities require permits for building additions, and if they are not correctly acquired, it is likely to be detrimental to your property value on resale. 

 

Hire a realtor – A realtor can focus their trained eye on areas that you can maintain or improve the home value that you might not have thought of. We get used to our homes and don’t see them with the critical eye that a potential buyer might, so having a realtor in your corner can help you keep ahead. 

 

## How To Increase Your Home Value

 

<img load="lazy" src="https://porch.com/advice/wp-content/uploads/2021/11/immo-renovation-UqNEbyRQ660-unsplash.jpg" alt="kitchen in middle of remodel">

 

Remodel – It’s a big undertaking, but if you want to maintain your home value and stay competitive in the resale market, remodeling is the best way to keep your home current. That’s not to say that you have to gut your home down to the studs every ten years, but making comparatively small upgrades like creating a more open concept floor plan or putting in more oversized windows (even just repainting) will help retain property value. 

 

Add features – Maybe you finish the basement or take that spare bedroom and create a home gym; anything you can add to your home that a future buyer would find attractive will work in your favor. This is also a great way to engage a real estate agent—they know what people are looking for in a home and can give you great advice on what would be an attractive feature to add to your home. 

 

Good maintenance – Little things add up, and they can quickly amount to enough things that, together, decrease your home value— if you need to have a portion of your fence replaced, no problem. Same with new gutters, some new [landscaping](https://porch.com/advice/xeriscaping-landscape), or exterior paint. Taken individually, these things are not likely to decrease your property value much. But all together, they definitely will. Keeping those pesky little tasks in check is one of the best ways to make sure that you don’t have a mountain of upkeep to do when you go to sell!

 

Now that you have a clear picture of the potential pitfalls that could decrease your property value and how to avoid them, you’re all set to make sure that you get the most out of your property when you choose to sell.

Comprehensive guide on preserving the value of your home. Detailing how to avoid common pitfalls of home buying and subsequent home maintenance.

Don’t Let Your Property’s Value Decrease - OfferMarket

Don’t Let Your Property’s Value Decrease

A hard money lender is a type of lender who provides short-term loans to business entities that are secured by real estate. Unlike traditional banks, hard money lenders focus on the value of the property being used as collateral and the quality of the deal rather than the income of the borrower.

 

## Hard Money Lender - Overview

 

Hard money loans are typically used by full time real estate investors and landlords who need access to funding to purchase or renovate properties because they don't have a W-2 income typically required to work with a bank or already have extensively leveraged portfolio and their traditional lender has tapped out. The interest rates on hard money loans are higher than traditional loans, often in the double digits, and the loan terms are typically much shorter, ranging from a few months to a few years in order to compensate the lender for higher risk associated with typical deal used to fund by these loans.

 

While hard money loans can be expensive on relative basis, they can be a useful tool for real estate investors and landlords who need real estate funding to pounce on a deal or who may not qualify for traditional financing due to poor credit, existing leverage, or lack of income documentation. Hard money lenders can be individuals or companies, and they typically have their own specific criteria, a 'credit box', for approving loans.

 

## What is a hard money lender?

 

A hard money lender is a type of lender that offers short-term and long-term business purpose, non-owner occupied loans that are secured by real estate. These loans are typically used by real estate investors, landlords and developers who need access to funding to purchase or renovate real estate. Unlike banks and traditional lenders, hard money lenders are less concerned with the borrower's job income and more focused on the value of the property being used as collateral, quality of the deal and borrowers operational track record.

 

Hard money loans are generally more expensive than traditional bank loans, with higher interest rates and fees. However, they can be a useful tool for real estate investors who need to move quickly on a deal or who may not qualify for traditional financing due to poor credit or lack of income documentation. Hard money lenders may also work with borrowers who need bridge financing, which is a short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing property.

 

While hard money loans can be a good option for real estate investors, borrowers should be aware of the risks involved. If the borrower defaults on the loan, the hard money lender can foreclose on the property and take possession. Therefore, it's important for borrowers to carefully consider their ability to repay the loan and to work with a reputable hard money lender who is experienced in the industry.

 

### Benefits of working with a hard money lender

 

#### Easier to qualify for a loan

 

A hard money lender is more likely to approve loans for borrowers who may not qualify for loans with traditional banks. This is because a hard money lender is not subject to the same strict lending standards as traditional banks. A hard money lender typically focuses on the value of the collateral being used to secure the loan, rather than the borrower's income. However, its a common misconception that hard money lenders don't consider borrowers credit worthiness. If a borrower lacks track record, conventional measures of creditworthiness such as a credit score or financial history is the only thing left for a hard money lender to make decision on. This makes it easier for borrowers with no W-2 income to qualify for a loan, such as any self-employed professional such as real estate investors, contractors, real estate agents or landlords. 

 

Main reasons why it is easier to qualify for a loan from a hard money lender are:

 

- Hard money lenders are not subject to the same strict lending standards as traditional banks. This means that they are more likely to approve loans for borrowers without W-2 income. However this doesn't mean that the borrower can have bad credit, since credit score is still an important metric used for loan underwriting
- Hard money lenders typically focus on the value of the collateral being used to secure the loan. This is another reason why W-2 income plays a smaller role when it comes to borrower qualification
- Hard money lenders are more flexible with their offering. Unlike banks that have very rigid, product specific, lending criteria, a hard money lender may have their own pull of capital meaning that they are more flexible with products that they can offer from the perspective of loan duration, rate, collateral class and any other metric used to quantify a loan. 

 

#### Faster timeline to closing

 

Banks and private money lenders have different lending processes and requirements that can affect the speed of the lending process. Here are some factors that can hold up banks' lending process compared to private money lenders:

- Strict Underwriting Process. Banks typically have a more rigorous underwriting process compared to private money lenders. They often require more documentation and verification of the borrower's financial information, such as tax returns, credit reports, and employment history. This can take longer to collect and process, leading to a slower lending process.
- Income Verification. Banks typically require a higher credit score and income verification to approve a loan. They may also have stricter debt-to-income ratio requirements. These additional requirements can delay the lending process as the bank spends more time assessing the borrower's financial background.
- Regulatory Compliance. Banks are subject to a wide range of regulations designed to protect consumers and ensure the safety and soundness of the financial system. These regulations can be time-consuming to comply with, which can slow down the lending process. Private money lenders may not be subject to the same level of regulation, which can make the lending process faster.

In contrast, a hard money lender can often offer faster loan approval and funding times due to their streamlined processes and flexible underwriting criteria. However, due to these factors and higher risk faced by investors in this lending space, a hard money lender may charge higher interest rates and fees compared to banks to protect themselves from increased likelihood of not getting repaid. 

 

### Risks of working with a hard money lender

 

Borrowers must carefully weigh the risks and rewards of working with a private money lender and ensure that they have a clear and viable plan for repaying the loan before entering into any loan agreement. It's important to do your due diligence and research potential lenders, as well as seek advice from trusted advisors such as other real estate investors, developers or landlords. 

 

- Higher Overall Risk. Hard money lenders generally operate in a higher risk environment than traditional lenders such as banks. As a result, the terms of the loan may be less favorable to the borrower, including higher interest rates and fees, shorter repayment periods, and lower loan-to-value ratios. Borrowers must carefully consider the risk versus reward of taking out a hard money loan, and ensure that they have a clear and viable plan for repaying the loan.
- Personal Guarantees. Private money lenders may require borrowers to provide personal guarantees for the loan, which means that the borrower is personally liable for the loan if they default. This can put the borrower's personal assets at risk, such as their home, cars, or savings. Borrowers must carefully consider the potential consequences of a default and ensure that they have the means to repay the loan before taking out a hard money loan.
- Higher Monthly Payments. Hard money loans typically have shorter repayment terms, usually between 12 to 24 months. This can result in higher monthly payments than traditional loans, which can increase the risk to the borrower if they experience unexpected expenses or a drop in rental income produced by the property. Borrowers must ensure that they have the cash flow to cover the monthly payments throughout the loan term.
- Prepayment Penalties: Some hard money loans may come with prepayment penalties, which can make it difficult for the borrower to refinance the loan if interest rates fall. This can leave the borrower with limited options if they need to exit the loan before the end of the term. Borrowers must carefully review the loan agreement and ensure that they understand the terms of the loan, including any prepayment penalties, before signing on the dotted line. However, this is a much lower risk since most hard money loans are short term in nature. 

 

### What questions should I ask a hard money lender?

 

When you are considering a hard money loan, it is important to ask the lender a number of questions to make sure that the loan is right for you. These questions include:

 

1. What are the fees associated with the loan? 
2. What is the interest rate on the loan?
3. Do I need to provide a personal guarantee?
4. Do you require a business entity as a the borrowing entity?
5. Do I need to pledge shares?
6. What is the term of the loan?
7. Are there any prepayment penalties?
8. What is the collateral for the loan?
9. What is the lender's experience in real estate lending?
10. What are the appraisal fees?
11. What is the optimal Loan to Value (LTV) on this loan to get the best interest rate?
12. Can I buy down the interest rate?
13. How many points do you charge?
14. Why should I go with you versus other hard money lender if your rates and fees are the same? 
15. What is the loan application process like? 

 

When you are choosing a hard money lender, it is important to compare different lenders and their terms to find the best loan for your needs. You should also make sure that the lender is licensed and insured.

 

## How does hard money lender work?

 

A hard money lender typically act as intermediaries between borrowers and capital providers, underwriting the loans and managing the loan servicing process. The capital providers may be a network of individual or institutional investors who compete for borrowers' loans. The hard money lending supply chain may vary depending on the lender, with some lenders using their own capital to fund loans and others relying on a network of investors.

 

1. Borrower Requests Loan: A borrower seeking a hard money loan submits a loan application to a hard money lender, usually including details of the property being purchased or refinanced, the borrower's credit history, and the proposed loan terms.
2. Lender Evaluates Loan: The hard money lender evaluates the loan application, including the borrower's creditworthiness and the value of the collateral property. They may also request additional information or documentation to help evaluate the loan.
3. Loan Underwriting: The hard money lender underwrites the loan, determining the loan amount, interest rate, and other terms. Unlike traditional lenders such as banks, hard money lenders typically focus more on the value of the collateral property than the borrower's credit history.
4. Loan Approval: If the hard money lender approves the loan, they provide the borrower with a loan commitment letter outlining the terms of the loan, including the interest rate, repayment period, and any fees or prepayment penalties.
5. Capital Providers: Hard money lenders may be intermediaries who connect borrowers with a network of individual or institutional investors who provide the capital for the loans. Alternatively, they may use their own capital to fund loans.
6. Loan Servicing: After the loan is funded, the hard money lender services the loan, collecting monthly payments from the borrower and managing the loan account.
7. Loan Repayment: At the end of the loan term, the borrower repays the loan in full, including any interest and fees. If the borrower fails to repay the loan, the hard money lender may foreclose on the collateral property to recover their investment.

 

## How to find a hard money lender?

 

Finding a hard money lender can be a daunting task, but there are several resources available online that can help you identify potential lenders. Here are some tips on how to find a hard money lender and what to look for.

 

The most effective way to find a hard money lender online is to use search engines and variety of key word terms such as: 

 

1. "Hard money lender"
2. "Private money lender"
3. "Hard money loans"
4. "Private money loans"
5. "DSCR loans"
6. "Fix and flip loans"

 

These are just some of the key words that you can use. Once you search a handful of these, on the first page of the results you will see some repeating company names. Visit those sites and build a list of potential lenders you want to reach out to to start your evaluation process. 

 

## How to pick a hard money lender?

When evaluating potential hard money lenders, consider the following criteria:

- Experience: Look for lenders who have a proven track record of successful lending in the real estate industry.
- Reputation: Research the lender's reputation in the industry, including reviews from other borrowers and industry professionals.
- Loan Terms: Consider the loan terms, including interest rate, loan-to-value ratio, and repayment period.
- Fees: Check for any upfront fees, such as application fees or appraisal fees, and ensure that they are reasonable.
- Communication: Look for a lender who is responsive and communicates clearly throughout the loan process.
- Warning Signs: Be wary of lenders who require large upfront fees, make promises that seem too good to be true, or pressure you to make a quick decision.
- Positive Signs: A high-quality hard money lender will have a reputation for transparency and honesty, and will be willing to answer your questions and provide references from other borrowers.
- Don't Overlook the Details: Review all loan documents carefully and ensure that you understand all of the terms and conditions of the loan. Don't be afraid to ask questions or seek advice from trusted professionals such as attorneys or financial advisors.

In summary, finding a hard money lender requires research and due diligence, including evaluating their experience, reputation, loan terms, fees, and communication. Look for warning signs such as large upfront fees or unrealistic promises, and seek out positive signs such as transparency and honesty. Don't overlook the details of the loan documents and seek advice from trusted professionals as needed.

A hard money lender is a type of private lender who provides short-term loans that are secured by real estate. Unlike traditional banks, hard money lenders focus on the value of the property being used as collateral

Hard Money Lender - Loans secured by real estate

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