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During most real estate transactions, it will become necessary to have a home appraisal done on the subject property. This formal process of evaluation is the most effective way to determine the current value of a home not only for a buyer and seller but also for the lender who is providing financing for the purchase or refinance. While the concept might not be initially confusing, there are several misconceptions about the industry that can make the process seem complicated. Understanding what the appraiser does and how their evaluation plays a role in your financing can make the transaction easier.
The Purpose of a Home Appraisal
As you may know, home values fluctuate because of a variety of factors including supply, demand and regional influences. A home appraisal is done to determine the current market value of a property. Since this value will be used by the lender to determine equity and loan-to-value, an approved, reliable appraiser must be hired to complete the evaluation. It is important to note that he formal appraisal report that the appraiser files when financing is being sought from FHA, FNMA and Freddie Mac, will be registered with the national database and kept on file for six months.
