Must I go Through the Appraisal Process?

Yes, you must. Whenever money is loaned against a property, the lender will want to ensure the property is actually worth what you are paying for it.

This is so that if you were to default on the mortgage, they would have a reasonable idea of what they could expect to get for it if they had to sell it. They use an appraisal to determine the value.

An appraisal is ordered after a contract is signed and accepted on a property, and you – the buyer – will pay for it upfront.

Your lender will use their appraisal management company (AMC) to perform the appraisal. A federal law prohibits lenders and appraisers from having direct contact with one another, so the AMC will assign a specific appraiser to perform the work.

The appraisal itself is completed in two parts. The first part is done online by pulling data for similar properties that have sold recently in the same area – these are called comparables, or comps. The data from comps is compared to the information on your property, called the subject property.

Because no two homes are exactly the same, information from the comps is adjusted to fit the subject property. Details that may need to be adjusted include number of bedrooms, number of baths, lot size, etc.

The second part of the appraisal is a physical inspection of the property. In this part, the appraiser must establish whether the subject property is in the kind of condition that the lender expects it to be in.

Once this has been done, the appraiser writes up the report and sends it to the lender. Regardless of whether you purchase the property in the end, the buyer has the right to obtain a copy of the appraisal, as you paid for it.

If you need additional information on the appraisal process, contact your mortgage professional.