Home Buying Terminology -- What's An Appraisal?
During the home buying process, you'll hear the term "appraisal"
mentioned at some point.
Chances are, you already have a general idea what this term
means. But when it comes to mortgages and home buying, you need
to know exactly what an appraisal involves and how it affects
you.
First, a definition:
Appraisal -- A professional appraiser's estimate of the
market value of a property. Appraisals take into account the
local market conditions and the characteristics of a property.
They are required by most lenders.
In other words, the appraisal is the lender's way of determining
a realistic market value of your future home. The lender uses
the appraisal to ensure that the home is actually worth the
price you've agreed to pay.
In the unfortunate event that you can't pay your mortgage, the
bank will foreclose on the home and resell it. Not a nice
thought -- but it's reality. The appraisal is how the lender
protects its own financial interests.
Generally, you'll have little control over the appraisal process
and won't even be present for it. Chances are, your lender will
arrange the appraisal, and the house will either appraise at the
asking price or not. Hopefully the former.
If the home appraises for less than the asking price, you have
two options. You can come up with the difference, or the seller
can reduce the asking price to match the appraisal.
Also keep in mind that an appraisal is not a home inspection. A
home inspection is something you should obtain to protect your
investment. An appraisal is the appraiser's opinion about the
value of your prospective home. But that's it. Appraisers will
not test the functionality of appliances, inspect the roof, or
perform other tasks a home inspector would do.
* Copyright 2006, Brandon Cornett. You may republish this
article in its entirety, provided you leave the byline, author's
note and website hyperlink intact.