Mortgage Basics
Appraisals

An appraisal is an expert evaluation of a property’s value conducted by a certified appraiser. The appraiser uses various criteria such as the property’s condition, location, size, and comparable property sales (known as "comps") to estimate the market value of the home. The lender uses this value to determine how much they are willing to loan you. An appraisal protects both the lender and the borrower, ensuring the loan amount is appropriate for the property’s value.

Appraisers use several methods to determine the value of a property, with the most common being the sales comparison approach. This method involves comparing the property being appraised to similar properties that have recently sold in the same area to establish a fair market value. Another method is the cost approach, where the appraiser calculates the cost to replace the home, factoring in land value, construction costs, and depreciation. This approach is often used for unique properties or properties with significant upgrades. For investment properties, the income approach is commonly included, which shows the properties income value based on income it generates, such as rental income. These methods help the appraiser determine an accurate and fair value for the property, ensuring both the buyer and lender are protected.  

The appraisal is typically ordered by the lender during the home loan process, but it is owned by the borrower. Once completed, the lender will review the report, but they are not the legal owner of the appraisal document. You, as the borrower, are entitled to receive a copy of the appraisal once the process is complete, and it may also be shared with the seller or other parties involved in the transaction.

In most cases, if you change your mortgage company, you will not have to pay for another appraisal. Depending on the loan program, the original lender may transfer the appraisal to the new lender. However, some appraisal firms may charge a small "Appraisal Retype Fee" for additional clerical work needed to update the appraisal for the new mortgage company. It’s important to note that the original lender may have the right to refuse to transfer the appraisal, in which case a new appraisal will be required. To avoid any surprises, it's best to speak with your loan officer to confirm whether your appraisal can be transferred and if any additional fees apply.

The market value of a property is determined by the appraiser, who considers multiple factors such as the home’s condition, its location, size, and comparable sales in the area. Ultimately, it is the appraiser’s professional expertise that sets the market value, although they rely on data, trends, and local market conditions to ensure accuracy. In some cases, the final appraisal value may differ from the purchase price, which can impact your loan terms or negotiations with the seller.  

You can help the appraisal process by providing relevant information and ensuring the appraiser has access to all areas of the property. Consider giving the appraiser a list of recent home improvements and repairs, as well as any upgrades that may increase the home’s value. Make sure that the appraiser has access to all rooms and external areas, including the attic, basement, and garage. Being available to answer any questions the appraiser may have can help ensure the process runs smoothly and that all factors affecting your home’s value are properly considered.