Appraisal day, the day both sides of a real estate transaction hold their breath, in anticipation of the outcome. So, what is an appraisal exactly? And why is it needed?
An appraisal is a non-biased valuation of a home, and it is REQUIRED if you are using a loan to buy your home. Lenders want to ensure that they are loaning you the appropriate amount of money, and to do that, they order an appraisal. Imagine if your friend gave you a "very valuable" coin in exchange for a $10,000 loan. Wouldn't you want to make sure that coin is really worth that big of a loan? That's the lender perspective.
An appraisal is done by a third party, someone with no connection to either side of the transaction, and it takes into account everything about the home- condition, location, closed sales of comparable properties nearby, and how long they took to sell. All of this information is compiled and analyzed, and the appraiser comes up with their opinion of the value of the home. Read through the infographic below to get a better understanding of the process. Next week we'll answer the question "What if my house doesn't appraise?" because I just KNOW that was your next question. Stay tuned!