The Appraisal Process
WHAT IS AN APPRAISAL?
An appraisal is an unbiased, professional opinion of a home's value. Appraisals are almost always used in purchase and sale transactions and are commonly used in refinance transactions. In a purchase and sale transaction, an appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location and features. A refinance assures the lender that it isn't handing the borrower more money than the home is worth. Lenders want to ensure that homeowners are not over- borrowing for a property because the home serves as collateral for the mortgage. If the borrower should default on the mortgage and go into foreclosure, the lender will recoup the money it lent by selling the home. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.
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