The Purpose of a Home Appraisal

Why is a home appraisal a critical part of the home loan process? Simple: it assesses the property’s value. Mortgage lenders need an appraisal to ensure they don’t lend homebuyers more than the home’s worth. Additionally, it prevents buyers from overpaying for property. Here’s more information on who performs home appraisals, how they’re created, and how lenders use them. 

Who Performs Home Appraisals?


Independent professionals perform home appraisals. These individuals have undergone rigorous training and must pass a state exam to become certified. Various levels of certifications dictate the size and price of a home they’re allowed to appraise.   


Note that mortgage lenders and other parties who can benefit from the outcome are prohibited from performing an appraisal, which prevents potential conflicts of interest from arising due to low or high appraisal values.


How Appraisers Determine Property Value


For the most part, appraisers use the home’s age and other local properties (related to asking and purchase prices) to determine the value. For instance, appraisers may use homes that have similar square footages, lot sizes and layouts as a guide. However, they will also consider other factors.


In addition to location and age, however, home appraisers may note the age, health, and stability of a property’s overall structure, roofing, and siding. They may also analyze appliances and house elements that will convey, such as interior doors, appliances, and electrical components.


Home appraisers may also look at aesthetic features, such as decks, pools, lawn fixtures, and landscaping elements. Significant home upgrades, particularly in the bathroom or kitchen, will also reflect positively in an appraisal. If you’re the one selling the home and want to get maximum value for your sale, it could be helpful to keep a list of the upgrades you’ve made while owning the home.


What Happens If the Appraisal Comes in Low?


If an appraisal comes in lower than the agreed upon price, it often gives the buyer the upper hand. For starters, buyers can back out of the deal completely if there’s an appraisal contingency in the purchase agreement. Most sellers don’t want that. Therefore, you can talk to your real estate agent to devise a plan to leverage the lower appraised value.


It’s also good for the homebuyer if the appraisal comes in high. That means you’re getting more value than what you agreed upon in the purchase agreement.   


Your Partners in the Homebuying Process

Equity Mortgage knows that getting the most accurate home appraisal is vital to finalizing the mortgage loan process. We keep both buyers and sellers informed about their options to make the best decisions for their situations. For questions about purchasing a home, call us at 1-800-332-9221.


* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.