When And Why An Appraisal Is Needed During The Home-Buying Process

Real Estate Blog

If you are in the process of making an offer on real estate for sale, once the seller accepts your offer, you will have to move on and start completing different steps required when buying a house. One of these steps is getting an appraisal on the house you are buying, and here are several things you should know about when to get the appraisal and why you need it.

The appraisal is one of the first steps needed by your lender

After the seller accepts your offer, you will need to contact your lender to give them details about the house you are buying, and one of the first steps the lender will do is order an appraisal on the house. You might be able to choose the appraiser you would like to use, but you will have to make sure that you choose one that your lender approves. Your lender can give you a list of potential options if you would like to choose your own appraiser.

Why lenders get appraisals

Your lender will get the house appraised simply to make sure that it is worth the amount of money you are paying for it. Lenders will not loan more money for a house than what it is worth, and typically lenders will only loan a certain percentage of a home's value. For example, if you are using a conventional loan, the lender might only lend 80% of the home's value.

The effects the appraisal can have on the deal

It's important to know that the appraisal amount can affect your loan. The first effect it can have is that it may alert you that you are overpaying for the house. For example, if you offered $200,000 on a house and the appraisal comes back with a value of $175,000, you may not want to pay the full $200,000, simply because the house is not worth that amount. In this case, you could back out of the deal.

The other effect an appraisal could have is problems getting a loan. In this example, your lender might not want to issue you a loan to buy this house because you are paying more than it is worth. If you still want to go through with the purchase of the house, you might have to come up with a larger amount to use for the down payment.

If you have questions about appraisals or the home-buying process, you should talk to a real estate agent.

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