What is an appraisal and why do you need one when you obtain a mortgage?

An unbiased professional opinion of a home's value and is used whenever a mortgage is involved in buying, refinancing, or selling that property.

A qualified appraiser creates a report based on an in-person inspection, using recent sales of similar properties, current market trends, and aspects of the home (for example, amenities, floor plan, square footage) to determine the property’s appraisal value.

The borrower is typically responsible for the appraisal fee, which can be several hundred dollars.

*Waiving an appraisal contingency?*

If the appraised value of the property comes in lower then the purchase price, the buyer is still responsible for the difference. For example, if the purchase price is $600,000 and the appraisal value indicates $575,000 this means the lender will provide lending based on a value of $575,000 NOT the 600k. The lender will only lend based on the value indicated on the appraisal report. This is why you should ALWAYS consult with your attorney and loan officer prior to waiving your appraisal contingency to make sure you can afford to do so.