Why does an Appraisal Matter?

An appraisal is a very important part of the loan process when applying for a loan. Simply stated, a bank or loan company will not loan more than the appraisal value of a home. Once a purchase contract is negotiated and the bank has approved the buyer, an appraiser will be sent out to assess the value of the home. This is an approximate $500 charge that the bank or loan company will charge the buyer.

The appraiser will walk through the home and notate all of the features of the home along with taking square footage measurements. Then the appraiser will search the MLS for similar homes that have sold over the last 6 months to a year and compare the value of those homes. The appraiser is extremely skilled at comparing homes and coming up with a value. This value is the appraiser’s educated opinion of what the fair market value of the home.

This is why Realtors also use the MLS to find similar comparable properties in order to price a home to list on the market. Home sales do not work like car sales where they are priced high in order to negotiate a lower price. Realtors know that a home must appraise for the contract price so they try to find a fair market value for the home.