One of the most important factors regarding your ability to refinance is your home appraisal.
Knowing how home appraisals work may be the key to understanding how the value of your home is calculated. Here is a quick overview of the appraisal process.
What is an appraisal?
An appraisal is an opinion of value that is completed by an independent professional appraiser who visits and inspects the size, condition, function and quality of the home. There are a few steps in the process:
- A licensed appraiser comes to the property and inspects the home.
- The appraiser will research similar homes in the area and compare recent sales to determine a fair market value.
- The appraiser will then give a final appraisal report with all the data and research to issue a final “opinion of value.”
Why do home loans require an appraisal?
A real estate appraisal helps to establish a property’s market value – the likely sale price it would bring if offered in an open and competitive real estate market. Appraisals protect both the lender, and the client, so they don’t overpay for a home.
How is an appraiser selected?
A licensed, independent professional appraiser selected by an appraisal management company (AMC) conducts the appraisal. By law, the appraisal must be done by a third party who has no interest in the outcome of the appraisal.