| An appraisal is simply an opinion of value. Some | | | | which the appraiser was unaware. You and/or your |
| appraisals are a professional appraiser's opinion, others | | | | real estate agent often know about non-MLS sales of |
| are guesses. Still others are based upon the | | | | which the bank appraiser has no knowledge. |
| sometimes harsh reality of the marketplace. The most | | | | Perhaps you decided to buy this house because the |
| important factors for appraisers are figures of recent | | | | seller spent thousands on structural and mechanical |
| real estate sales involving comparable properties. | | | | system upgrades. The lender is not to aware of these |
| Basically, there are only two opinions that matter. | | | | value-enhancing improvements. When you bring them |
| (1) The list price is a "wishful-thinking" value, merely a | | | | to the appraiser's attention, you quite possibly will |
| hopeful estimate. It is set by the seller. The sale price is | | | | induce the appraisal department to raise the appraisal |
| the real value. It is determined by you, the buyer. Of | | | | figure. The critical point to remember about this is: If the |
| course, the price you finally agree to pay is partially | | | | lender produces a low appraisal, you can always |
| determined by the seller through the negotiation | | | | contest it. |
| process. But you and only you decide how much you | | | | You might hear complaints when the lender's |
| are willing to pay. | | | | appraisers express a low opinion of value - "Why don't |
| The lender's is the second opinion that truly matters. | | | | they just appraise at sales price? After all, THESE |
| The bank usually employs appraisers, although | | | | buyers are willing to pay that much. Surely others |
| sometimes it uses third party "fee" appraisers. A value | | | | would, too." Ah, but that's NOT necessarily true. Some |
| of the property is determined, and the lender will then | | | | buyers (hopefully not you) do agree to pay too much. |
| make a mortgage loan based on this figure. | | | | The lender needs to protect itself from these |
| If the lender's appraisal "comes in" lower than your | | | | "lovestruck" buyers who must have that home. If the |
| agreed-upon sale price, you may not be able to buy | | | | bank eventually has to become the owner, by having |
| the home. The lender bases its lending decision upon | | | | to foreclose, it must have reasonable expectations of |
| this professional opinion of value. It will only loan a | | | | being able to recover all or most of its investment. |
| percentage of this figure. Therefore, if you are | | | | When negotiating the purchase of your home, be sure |
| counting on using the lender's funds in a certain amount | | | | you are always being prepared to "walk away" from |
| to finance the purchase of your home, a low appraisal | | | | the transaction if the seller is too unreasonable. There |
| from the bank can seriously damage your first time | | | | are plenty of other homes available. If you do this, the |
| home buying efforts. | | | | lender's real estate appraisal will almost certainly come |
| The lender's opinion of value can be disputed. The | | | | in at or above your sales price and thus cause you no |
| appraisal department at a bank will usually welcome | | | | problem. |
| previously overlooked comparable sales data | | | | Keep the Golden Rule in mind: "The banks have the |
| ("comps") and other factors which might affect their | | | | gold, so they make the rules. |
| appraisal. Sometimes there were sales in the area of | | | | |