Saturday, April 27, 2019 / by Connie Tracy
An appraisal is a vital part of the home buying and selling process.
If you're purchasing a home with a loan or refinancing your mortgage, the appraisal will make an impact on the amount of the loan you will be able to receive.
If you are selling your home, you want the appraisal to go well to support the potential buyers' financing. Either way, it is important to know how the appraisal process works and how an appraiser comes up with the value of your home.
What is an appraisal?
An appraisal is a report of a home's value prepared for a lender. A trained and licensed individual called an appraiser will gather information and submit the report according to specific criteria. The appraisal typically occurs after the seller has accepted the buyer's offer, and the lender is getting the paperwork ready for the loan.
An appraisal is used to determine if the amount of the loan is appropriate based on the home's condition, location, and features. Typically, lenders don't want to loan more money than a certain percentage of what the home is worth. The lender wants to be sure they can sell the home to cover the costs of the loan if the buyer defaults (doesn't pay) on their loan.
If the property appraises for the same or more than the contract price, buyers will generally receive the loan amount they asked for. If it appraises for less, the lender may reduce the amount of the loan, according to the balance. This ultimately can jeopardize the sale.
Appraisers are randomly chosen from a pool of qualified individuals.