How Does an Appraisal Work, and Do I Need One?

Another question in this episode is, "What if there's a grow house in the garage?" The guidelines for appraisals vary depending on who the lender is, whether it's Fannie, Freddie, VA, FHA, or Conventional. Nicole's guest is Paul Cress, AVP of Staff Appraisal Operations for Frisco Lender Services (FLS).

Nicole asked him, "So what brings that volatility, and what eases it overall?"

Paul told her, "Lately the reason it's eased is that interest rates have dropped, demand. It's simple supply and demand. Realistically, over the past three years, property values have risen more than they have at any other time in history. That's due to increased demand and decreased supply. It's caused quite a market stir where realistically, the purchase demand can't be caught up with, and appraisals are done in retrospect, they're a flash in time. And when you're looking back even weeks or days, and trying to keep up with this market, that's increasing day over day. That's what really caused the stir in the market and values to become undervalued or, become under what the contract price was. 

Nicole pressed, "If I have a buyer willing to pay an amount of money for a house, even if it's over asking price, isn't that the market value?"

You'll have to tune in to hear his answer, the issue of ADUs, grow rooms, and how much adding a rental unit can add to your home value.