A blog cannot deal with all aspects of a subject and is not intended to replace professional advice. It's purpose is to highlight information and identify areas of possible interest. Anyone wishing to discuss this blog or to make any comments or suggestions about this blog is invited to do so by either posting comments or emailing me directly.
One of the most important steps of the home buying process is the appraisal. If the appraised value does not meet or exceed the sales prices, the entire transaction can fall apart! That's why it is important to work with a fully trained and experienced real estate agent whose going to make sure that you aren't overpaying for a home. Here's how it works: In a home sale, the lender - for the buyer - is going to order the appraisal. Now since the property is usually the only colateral for the mortgage loan, the lender wants to make sure that the property is actually worth what is being paid for it. If the appaisal comes in below the sales price, the lender will refuse to fund the loan or ask for additional monies for the downpayment to make up that shortfall. Every lender has their own pool of licensed appraisers that they choose from at random. The chosen appraisers job is to determine the current market value of the home so they physically inspect the property, they look at comparable sales and then they make value adjustments - up or down - based on conditions or features that add or reduce value.
A good buyer's agent has a big role to play in making sure that you don't end up with an appraisal that is lower than the sales price.