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Appraisal: What Is It?


What is it? Do I have to have one?

An appraisal is necessary if you are financing the home. Your lender will order the appraisal on your behalf. The results of this appraisal are yours. The seller is NOT given a copy of the appraisal and will only need to know if the property does in fact appraise at the contact’s value. If the home appraises at the agreed value or higher, the contract will continue to move forward. If the home does not appraise, your agent will need to help negotiate the difference in order for your lender to agree to move forward with the loan process.

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What is an appraisal?

A home appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth. All lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate.

What is fair market value?

In real estate, fair market value is the price a buyer will pay and a seller will accept for a property under reasonable and ordinary conditions. This definition assumes that neither the buyer nor the seller is under any pressure to complete the transaction. When under pressure, such as the need to immediately relocate, either the buyer or seller may entertain a price that differs substantially from what would be considered otherwise. There are many other life situations that can exert pressure on one or both parties; and when they do, the price mutually agreed to may or may not reflect true fair market value.

The appraisal ensures you will not pay over fair market value for the home you are purchasing and serves to protect the buyer and the lender.

Do You Have More Questions About Appraisals?

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