The reason banks require an appraisal is to find a value for the home you are purchasing. Simply put the bank wants to makes sure there is enough collateral for the loan they are making. They don't want to loan $250,000 on a house only worth $205,000.
What an licensed appraiser does, is look at all the recent sales within the last 6 months. The homes the appraiser will be looking at will be similar to yours in size, no# of bedrooms, bathrooms, or garage size. The add or subtract values if there are differences. If you home has 2100 square feet and the home that they are comparing to has 2400 square feet and sold for $250,000. They willtake off a dollar amount for the 300 square foot difference. They may say your house is only worth $220,000 if everything else was the same. Appraisers have a general formula or system they use for the differences.
The appraiser is also looking at homes that are close ( in distance) to yours. They would like to find comparable sold homes in your subdivision. Then they will start to expand out further until they find enough to do a solid appraisal. They use between 3-6 different sold homes.
Even after an licensed appraiser does his job, the bank will review the appraisal. The bank has the ultimate power to approve the appraisal. Though sometimes they will lower the value of the home. Remember it is their money and they are only going to loan money out on a home that has the correct value.
For more buyers tips or sellers tips go to my websites www.RussRavary.com or DetroitMichiganRealEstateHOmes.com
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I am walking in the Tampa 3 day cancer walk in October. Support cancer research by going to www.the3day.org/goto/marianneravary and donate as much as you can. My wife got to live 20 years after finding out she had breast cancer due to advances in cancer treatment. Be part of the team and help me. I would like to be able to give some other "special lady" (like my wife Marianne) more days on this earth. If we can give another lady another night to enjoy with friends, an extra week to laugh & hug her kids, an extra month to love her spouse, or an extra year then our money will be going to a good cause. The grants from the Susan G Komen 3 day walk have been instrumental in cancer research. Help me give more time to somebody else please donate to the 3day walk. Thanks
Russ Ravary your Metro Detroit realtor
