Today's KCM Blog Post: "The Appraisal: A True Evaluation of a Home's Worth?"
The Appraisal: A True Evaluation of a Home’s Worth?
Every house for sale in today’s real estate market must be sold twice. First, you must find a buyer ready, willing and able to purchase the home. Second, you must sell the value of that house to a bank so they will agree to lend money based on the negotiated price. The second sale may be more difficult than the first in the current lending environment.
A mortgage is necessary in the vast majority of real estate transactions in this country. The buyer puts a certain amount of money ‘down’ and then borrows the remaining balance from a lending institution. The lending institution then issues a mortgage to the buyer using the house as collateral. In order to establish the value of the house (collateral), the bank will send out an appraiser. The appraiser will inspect the home; do research on the homes like it that have recently sold in the area and report back to the bank whatever it deems to be the value of the house. The bank must feel comfortable that the value is strong enough to justify using the home as collateral for the loan.
The appraisal process can be much more difficult in the current environment than it has been in the past for two reasons:
