The home appraisal process is one of the most confusing aspects of the home buying and selling process. Here are three of the most common myths about the appraisal process:
Appraisals are performed to confirm a home’s sales price. This is one of the most enduring myths about the home buying process. In reality, appraisals, in most instances, are ordered to assist lenders in making financing decisions. Nearly 90 percent of home purchases involve a home buyer who is taking out a mortgage. In that situation, lenders want to make sure they are not providing a mortgage loan for more than a property is worth. Instead of confirming the sales price, an appraisal is an independent estimate of value that’s designed to make sure a lender is making a wise decision on a mortgage loan. For example, a mortgage company would not want to provide a $200,000 mortgage on a home that’s worth only $150,000.
Appraisers work for the home buyer. Nope. In most home purchase transactions, the appraiser is working for a lender that is providing the home buyer with the financing. Only if a home buyer is paying cash will the appraiser work on the buyer’s behalf. Again, lenders order appraisals to make sure that they are not taking too substantial of a risk in providing a mortgage loan.
Appraisers check the condition of the property. Appraisers note the general condition of the property. But appraisals are NOT a substitute for a home inspection. Appraisers aren’t conducting an inspection of the features of the home, such as the roof, the foundation and the major appliances.