An appraisal involves the evaluation of the market value of real property including mobile home. It gives an estimate of the price that can be obtained by selling the property in a competitive real estate market. Appraisal is required when you intend to buy a property with the help of a mortgage loan taken against the same property. An appraisal is also necessary when you refinance your existing mortgage with a new home loan.

Your lender may need an appraisal in order to ensure that the property will sell at least at the amount which he will be offering as loan. The lender or the bank offering the loan needs an assurance that in case of default they can make up for the amount of cash they have invested in making the loan. This is why an appraisal is carried out on the property that is kept as security for a home loan.

A home appraisal is different from that of home inspection. The appraisers take notice of the various problems in the property but they never test appliances or inspect different areas in the property.

A residential appraisal report generally consists of the following information:

• Details of the property under appraisal.

Appraisers who are licensed by their respective states can evaluate your property value. Your lender may appoint an independent appraiser or else he may use his staff for conducting an appraisal. In both cases, the lender charges an appraisal fee which is included within the closing costs paid for your mortgage.

You may also select an appraiser, but in such a case, the results of appraisal will be reviewed before they are accepted. It is always better if the appraisal is done by a third party who has no financial dealing with either of the parties involved in home-buying or refinancing.

Your final approval in the loan process depends on a satisfactory appraisal of the property against which you have taken the mortgage loan. If the appraised home value does not support the loan amount, then the loan is never originated. The appraisal determines the loan-to-value ratio in mortgage loan, and if the loan amount exceeds the appraised property-value, then it is the borrower who has to pay higher costs and interest for getting a higher loan amount.

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Last edited by Jessica on Fri Mar 24, 2006 3:42 am