What is an Appraisal?
An appraisal is a process where a 3rd party individual, the appraiser, enters into a transaction to give an opinion of the market value of the property. Appraisals are not used in cash transactions, they are mainly involved in transactions that include a loan. The lender would love to lend a buyer 90% of the home the buyer is trying to buy, with the caveat that the home is actually worth the value on the contract. Lenders will only lend a certain percentage of the appraised value of a home, regardless of the contract value. This may create a situation where the appraiser thinks a home is worth less than the buyer has agreed to pay. In that scenario, the lender will lend based on the appraised value and the buyer will either have to pay the extra costs, renegotiate the contract, or cancel the contract.