Do I Need A Home Appraisal?

A home appraisal is required if you’re buying a property through a mortgage lender, not paying all cash. As a home buyer, you don’t have to worry about finding and hiring an appraiser, let the lender do that. Banks use appraisal management companies to find appraisers, these AMC companies have lists of local appraisers whom they randomly choose from, generally based on a geographic rotation. The fee the borrower pays goes to three different parties; the lender, appraiser and appraisal management company each take a cut. In general, a residential appraisal can cost from $250 to $3500. But typically, no more than $600. The lender needs to know how much the property is worth in order to know how much they’re willing to loan. Generally, an 80% LTV ratio is acceptable. If the buyer and seller have agreed to a $550,000 purchase price, but a couple weeks later the appraisal comes in at say, $525,000. The lender will likely only provide the buyer a LTV no greater than $420,000 (80% of $525,000). This is something every party involved dredges happening! This could damn a deal. However, in the event this happens, a reconsideration of value can be sent to the appraiser. The lender, homeowner or agents can provide the appraiser with additional comparable sales for the appraiser to reconsider. If this plan doesn’t work, the buyer and seller can agree at $525,000, buyer can walk away or buyer can come up with the $25,000 difference with cash. As an Appraiser, I can honestly say, we also don’t want this to happen. It’s not fun having a bunch of parties pi$$ed off at us. At the end of the day, appraiser’s are just the messengers. We are historians that can only go off the historical data. Don’t kill the messenger.