Real Estate & Mortgage Insights

Home Buyers Guide - The Appraisal

Buying a home can be a complex process with many important steps. You have probably looked at several homes before finding the right one. Then you submitted a purchase offer. After one or several counteroffers, the purchase offer has finally been accepted. Congratulations, you have almost bought a home.

There are still several steps necessary, which must take place to satisfy the conditions of the purchase agreement. The first of these steps is getting the appraisal done. In most instances, the lender will only loan about 80% - 90% of the value of the loan. The buyer must come up with the balance, called the down payment. Some types of loan may allow the lender to lend 100% of the appraised value. However, the key to this is still the appraised value of the property.

A licensed real estate appraiser performs this service. The lender, in most circumstances, will want to use their own appraiser. The appraiser will assess the property using a complex set is criteria to arrive at the appraised value of the property. Technically, this value is just the opinion of the appraiser of what the property is worth, but the result of the appraisal is king when it comes to getting your home loan.

If the property appraises for less than the purchase price, then you will have decisions to make. The bank probably will still loan you the money, but only a percentage of it. You can still buy, but you will have to make up the balance some other way. Alternatively, allow the purchase agreement to lapse and keep looking at other properties. If the purchase agreement lapses because the property did not appraise to the purchase price, the buyer's money should be returned.

If the property does appraise, the deal moves forward with the other conditions of the contract. Still on the agenda as you move towards closing are the home inspection and title search.

The appraisal is the most important condition met in the purchase agreement. It can make or break the deal, depending upon the results. However, once the property appraises, you are well on the way to closing.

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