How important is the appraisal?
The appraisal is a critical step in the buying process and is the step most frequently misunderstood.

 Who is the appraiser?
Appraisers are full time professionals licensed by the state. These individuals
undergo an extensive 2-year apprenticeship with an experienced appraiser. The final opinion of value is based primarily on the experience and data gathered by the particular appraiser.

What does it cost?
The fee for a typical residential appraisal is usually standard in a given geographic area;  in the our area, the typical cost is $300.  If the subject property is valued at $500,000 or above, the cost will be higher, and some lenders will require more than one appraisal. If a government mortgage (FHA or VA) is being used the fee is regulated by these agencies.

Where do I get a copy of the appraisal?
The buyer usually receives a copy of the appraisal at closing.  The seller is not entitled to a copy unless he/she ordered and paid for the appraisal.  When buying a home, remind your lender that you want a copy of the appraisal and make sure it's in the closing packet.

When is the appraisal done?
The mortgage lender will order an appraisal immediately after the buyer applies for a loan.  Depending on the appraiser's work load, the appraiser will typically visit the home within three weeks.  The written appraisal is usually complete within a few days.  The appraisal will be submitted by the lender for review by the mortgage underwriter.

Why do I need an appraisal?
All mortgage lenders require a professional appraisal, for their protection and the protection of the buyer.

How is the value determined?
An appraisal is simply a supported estimate of a home's value. There are three approaches for estimating the market value of any real estate:

  1. The direct sales comparison approach

  2. The cost approach

  3. The income approach

In most appraisals the appraiser takes the value derived from each of the three approaches, gives each a relative weight, and a determines a final value.

What if the appraised value is less than the agreed purchase price?
In these cases the mortgage lender may decide not to make the loan.  However, the buyer and seller have options to keep the contract together.  The parties should consider one or more of the following:

  1. The parties can agree to renegotiate the selling price.

  2. The buyer can increase his/her proposed down payment, which reduces the lender's perceived risk.

  3. If the parties feel the appraisal was in error they can consult with the appraiser and attempt to revise the appraised value.

The best option is to avoid this situation by carefully pricing the home when it's first offered for sale!

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