If you’ve purchased, refinanced or sold your home you are probably familiar with the term property appraisal. A property appraisal plays a very important part during the closing process.

So What Is A Property Appraisal Anyways?

A property appraisal is the evaluation and unbiased professional opinion of a home’s value and is used whenever a mortgage is involved in buying or refinancing.

 How Does This Process Work Exactly?

An appraiser comes over to your home and creates an in-person report using the recent sales of similar properties, the current market trends, and aspects of the home like amenities, floor plan and sq ft to determine the property appraisal value. The borrower handles any appraisal fees. 

 Why Is A Property Appraisal Needed?

Lenders want to make sure that homeowners are not over-borrowing for a property because the home acts as collateral for the mortgage. If the borrower goes into foreclosure, the lender sells the home to regain the money lent. The appraisal helps mortgage brokers and lenders to protect themselves against lending more than the homeowner may be able to recover in the worst-case scenario.

 What Happens After the Appraisal?

After the appraisal is done, the next step in the process is underwriting. The underwriter reviews the loan file to make sure all the required documents are submitted. Then, the underwriter assesses the risk associated with the loan and denies or approves the loan based on all the information provided. 

What Lowers a Home Appraisal?

Where the home is located plays a big part in the valuation process. Homes will be impacted if the home is in an undesirable neighbourhood or situated next to a junkyard, power lines or a busy street. However, you can counter this effect by doing home improvements to boost your home’s appeal like upgrading the kitchen, adding a deck etc. See our 6 DIY Home Improvements to increase your homes value article for more information on this. 

In conclusion, Property Appraisals are important factors in the home buying process, as it helps you to secure financing, as well as to protect your investment. It is key to do an appraisal earlier to know your home’s worth because if you wait long enough and the appraisal value is lower than expected, it may delay your transaction or potentially lead to cancellation.