If you have purchased a home before or ever received a loan on a property then you have probably heard the term, Appraisal!

So what is it?  I often hear that it is the value of the property and to that I say that is partially correct!

An appraisal is an independent valuation by a licensed third-party providing analytical evidence to support the appraiser’s determination of a home’s value.  The appraisal though is just one indication of value and is most often used by the lender to determine an amount that they would be willing to loan to an individual on the purchase of the subject property.  My friend and trusted mortgage partner, Alex Austin of Executive Home Lending states, “the appraisal allows us to put a numerical value on a property and protects our investment in the property”  Alex Austin also stated “An appraisal is a valuation at a moment in time but the market value is fluid and can be affected by both property condition and market conditions so the market value is always changing” The appraised value is important to the lender because if for some reason the borrower can no longer pay for their home the lender wants a probable likelihood to have its investment in the property returned if the home has to be sold.

An appraisal is not the only value of the property however, buyers often place an intrinsic value on a home and that amount may be higher than the appraised value.  If a buyer is willing to put more of their own funds down on a property then they have the right to purchase a property at an amount over and above the appraised value of the property.

Appraisals serve a valuable purpose to protect both buyer and lender in a home purchase but the appraisal value may not be the ultimate value of a property!