Basics of a Home Appraisal

Most buyers use mortgage financing in order to purchase a home. The appraisal is essential to a bank giving buyers a loan on their future home.

What is an appraisal?
An appraisal is a valuation of the property that you want to purchase.

Why do we need an appraisal?

Appraisals are needed because lenders require an appraisal if you are using the property as collateral for a loan on the property. The bank wants to make sure that the property is worth at least as much as the buyer and seller have agreed in the contract.

Who does the appraisal?
An appraiser is hired by the lender. The lender usually hires a firm who then find impartial local appraisers who have no financial interest in the transaction. The buyer usually pays for the appraisal unless negotiated otherwise in the terms of the purchase contract.

What factors into the appraisal?
Appraisals take into account:
1. Details about the property.
   a. Property size - square footage, bedrooms/bathrooms
   b. Improvements - remodeled kitchen or bathroom? As a seller you can make a list of upgrades to give to the appraiser.
   c. Extras - fireplace, water softener system, pool, spa, etc.
2. Comparing the property to other properties in the area (comparables or comps).
   a. Similar homes in the immediate area that are close in size and condition are used to show value.
3. Condition of the property.
   a. Does the flooring or roof need repairs? Are the appliances old and outdated?
4. Location of the property
   a. Is the property located on a busy street or near large power poles?