The reason banks require an appraisal is to find a value for the home you are purchasing. Simply put the bank wants to makes sure there is enough collateral for the loan they are making. They don't want to loan $250,000 on a house only worth $205,000.
What an licensed appraiser does, is look at all the recent sales within the last 6 months. The homes the appraiser will be looking at will be similar to yours in size, no# of bedrooms, bathrooms, or garage size. The add or subtract values if there are differences. If you home has 2100 square feet and the home that they are comparing to has 2400 square feet and sold for $250,000. They willtake off a dollar amount for the 300 square foot difference. They may say your house is only worth $220,000 if everything else was the same. Appraisers have a general formula or system they use for the differences.
The appraiser is also looking at homes that are close ( in distance) to yours. They would like to find comparable sold homes in your subdivision. Then they will start to expand out further until they find enough to do a solid appraisal. They use between 3-6 different sold homes.
Even after an licensed appraiser does his job, the bank will review the appraisal. The bank has the ultimate power to approve the appraisal. Though sometimes they will lower the value of the home. Remember it is their money and they are only going to loan money out on a home that has the correct value.
For more buyers tips or sellers tips go to my websites www.RussRavary.com or DetroitMichiganRealEstateHOmes.com
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