What Is An “Appraisal” In Real Estate?
An appraisal is the estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised. This is required by mortgage lenders to be sure that the money they are lending to a new homeowner or a current homeowner is a fair amount for the home. The lenders want to be sure that the buyers are not overpaying for the property. This is to protect the lender. If the borrower stops making payments on the home and the lender needs to sell it, the lender wants to be sure it can recuperate the amount of owed on the loan.
The value of the home will be calculated by examining the current local housing market and the comparable properties that have recently sold. It will also include the features of the home, square footage and number of bedrooms and bathrooms. The appraiser will also look at the overall condition of the home as well as the landscaping. If there is maintenance or repairs that will need to be completed, the appraiser will note these. The appraiser will then complete the appraisal report on a standard required form.
The appraisal can potentially break the deal. If the selling price and the appraisal are not comparable, the lender will not approve the deal. The lender will not want to lend money for a home that is not worth the amount being loaned. As a buyer, this can be a good negotiation tool. No one wants to overpay for a home.
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