What is an Appraisal?
An appraisal is an independent valuation of a property to
determine its market value.
In general, an appraisal is ordered by a lender or
client and is
usually paid for by a buyer. All loans require an
The reason the lender requires an appraisal is that you
may think a property is worth more money than it really is –
leading you to make an offer that may be too high. If the
appraiser leads the lender to believe the property is
overvalued, the lender may feel this is a risk and may not
grant you a loan.
Basically, lenders want to protect themselves by ensuring
the property you are considering buying with a loan from
their institution is worth its market value. The appraisal
helps ensure that you the buyer do not end up having
negative equity on a home.
The Importance of an Appraisal
Getting a property appraised is extremely important for
several reasons. As mentioned above, it can help you find
out how much a property is worth. It can also help you lower
your taxes and eliminate private mortgage insurance.
A licensed appraiser can also help you with estate
planning, analyzing the feasibility of proposed
improvements, determining the best use of a property and
with insurance valuations.
The Appraisal Process
An appraiser's duty is to inspect the property being
appraised to ascertain the true status of that property.
Toward this end, an appraiser will analyze market data,
including both historic and current comparable sales,
current offers, pending sales and proposed improvements to
arrive at an appraised value for your home. The appraiser
will also compare your property to the broader market.
Depending on the purpose of the appraisal, the appraiser
might choose to weigh different factors more heavily than
In generating his appraisal, an appraiser will pull from
a wide variety of sources, including a local Multiple
Listing Service, local real estate professionals, county
courthouse records, private data vendors, owner interviews,
and his or her own personal knowledge. The quality and
reliability of each piece of information will be weighed by
the individual appraiser.
How an Appraisal Differs from a
You must keep in mind that an appraisal is different than
a professional home inspection. An appraiser formulates an
opinion of a property's value for a lender, while an
inspector educates the buyer about the condition of the
and its components.
The Ultimate Value of an Appraisal
An appraisal performed by a professionally licensed
appraiser is an invaluable tool that will allow you to make
wise real estate investment and sales decisions.