In order to determine that the home (asset) that the bank is giving the loan on is valued at or above the purchase price, the bank sends out an independent appraiser to prepare a detailed analysis of value based on recent sold properties in that same area.
An appraisal is needed by the bank to make sure the loan they are giving is justified by the value given in the appraisal. Many banks have you pay the appraisal fee out of pocket before the settlement, the fees can range from $200-$500/appraisal.
The appraisal is part of every home purchase where there is bank financing involved.
An appraisal is ordered to reassure the bank that the house is worth enough money, in todays market, for the bank to make the loan you are asking them to make.
Hope that helps
An Appraisal is a formal estimate of a home's value, unlike an informal Market Analysis performed by a realtor or home owner. A professional appraiser is licensed to make this determination based on a thorough look at a home: square footage, number of bedrooms and bathrooms, finished or unfinished basement, updates and upgrades, condition of the home from the roof to the lower level of the home, and most importantly, the value of similar home sold in the neighborhood in the last six months. This appraisal is an absolute requirement by the bank in order to FINANCE A HOME PURCHASE or REFINANCE an existing loan. Therefore a BUYER will have a home appraised as part of the loan process, and pay for this appraisal as part of the closing costs. A SELLER may order an appraisal before listing the home, so that the best, competitive listing price can be determined. Since the buyer's bank gets the home appraised, in this market it is a very good idea to spend the money upfront ($300-$500) for an appraisal upfront and sell the home in a timely manner for the best price, rather then pricing the home incorrectly and keeping the house on the market too long, which eventually drives the price of the home down. To answer any of your questions more specifically, please feel free to call me at:443-226-5046. I am always glad to assist buyers or sellers with their real estate needs! - Ana Gabrea, Realtor - Keller Williams Realty Centre, Columbia, MD
Re/Max Advantage Realty