An appraisal is an estimate of a home’s value based on an assessment by a qualified professional appraiser. The appraisal is crucial in determining how much a lender will approve for you to purchase a home. If the appraisal falls short of the purchase price agreed upon, the mortgage could be refused or you will have to take out a smaller loan amount. New rules state that a mortgage cannot exceed 100% of the value of the house, so if the appraisal comes back less, lenders are prohibited by law to not lend you more than what the house is valued at.
If needed, to make up the difference, you will have to come up with a larger down payment or renegotiate a lower price with the seller. Have no fear; you do not have to go at this alone! Your realtor will guide you through this process and should provide you with a comparable market analysis before making a final offer on the house. This analysis will show you the value and sales prices of other properties in the area. This will ensure you are paying a fair price. This also protects you from having the appraisal coming in lower because the appraiser will be using this same information in determining the value of the house.
After the appraisal is completed, we review it to make sure there are no outstanding issues that need to be addressed. You will be provided a copy of the appraisal, per federal law. If you notice something wrong in the appraisal, you have the right to request an explanation or correction.
It is important to note that an appraisal is not the same as a home inspection.