Home Appraisal

A home appraisal is a review of a house to determine a house's actual market value. While you are looking at houses you will begin to gain an appreciation of current house values in the market. In addition, your real estate agent makes their living understanding how to sell houses, so they will have a strong appreciation for what a house is really worth. A formal home appraisal takes this step one further. This is where is trained professional looks over the house for purposes of coming up with a formal valuation.

When you are buying a house this is a step that will not occur until you have applied for a loan. So you will also have done the offer, had it accepted, and already signed a purchase agreement. Your bank or mortgage company will order one of these so that they can get an independent third party assessment of the value of the house. As with the home inspection, the reaason they want this done is to protect their interests.

The lender must manage their risks, and one of those is that you eventually default on the loan. Their recourse is to take posession of the house and sell it. This only solves their problem if the value of ths house is greater than the value of the loan plus the expenses they will incur in selling it. The home appraisal is their way of making sure that the house is indeed worth at least that amount of money. Once your lender has this reassurance you will have cleared one of the many hurdles on the way to getting your loan commitment letter.