If you’ve never bought a home before, you’ll soon find it’s a very involved process with a lot of different steps; especially if you’re seeking a home loan. If you apply for a home mortgage, your lender will likely require an appraisal. Without an appraisal, they can’t provide you with funding to make the purchase.
What is a home appraisal?
At its core, an appraisal is an evaluation of the home’s value. It’s the lender that typically chooses a professional appraiser. The appraiser must be licensed or certified and is generally local. The value of the house can’t be determined by the structure itself (condition, materials used, square footage, and more). Value also depends on how much similar homes have sold for in the area as well as current local real estate market trends.
Why do you need an appraisal?
Lenders want professional property appraisals so they can compare appraisals to list prices. They want to ensure the appraisal isn’t well below what you’re planning on paying for it. If you’re overpaying significantly, the lender may have trouble recouping the loan if you default. They will have to foreclose on your home and sell it on auction but it’s unlikely they can get more than its appraised value, causing them to lose money.
As you can see, getting an appraisal is an important part of the home-buying process, especially if you’re taking out a home mortgage.