Understanding the home appraisal process
Because the fair-market value of your home affects the equity you have in your home, it also affects the amount lenders may be willing to lend you. For this reason, whether you’re buying a new home or refinancing your existing home, your lender will order a home appraisal to determine what the home is worth in the current market.
What is a home appraisal?
A home appraisal is an assessment of a home to determine its fair market value. The appraisal is completed by a lender approved, State Licensed professional who through analysis of the condition of the home, square footage, comparable sales in the area and many other considerations comes up with a proposed fair market value of your home. This is the value that is used by the lender to make sure your specific loan request is supported by the appraisal value.
“Comps,” or “comparables,” are one method appraisers use to see how your home compares to homes that have sold recently in the neighborhood. Unless homes are identical, the appraiser will adjust the value of your home up or down depending on how it matches those recently sold homes.
The appraisal report is a standard form the appraiser uses to communicate their findings to the lender. The report includes information such as the home’s legal description, size, shape, age, and condition, as well as an analysis from the study of comparable homes. A copy of the appraisal report will be provided to you during the financing process.