Whether you’re selling a condo in Grand Junction or you’re looking for a home for sale in Loma, CO, you need to know that lenders are most likely going to require an appraisal. The appraisal affects you no matter which side of the real estate transaction you’re on, so here’s what you need to know.
Why Lenders Require Appraisals
Lenders aren’t experts on every (or any) real estate market. They rely on locals to help them determine whether they’re making a good investment.
Enter the appraiser.
The appraiser puts a value on your property so that the lender knows whether it’s good enough collateral. (On nearly all mortgages, the house is collateral. If you don’t make your payments, the lender takes the house and sells it to someone else.)
Lenders want to make sure they’re not forking over too much cash to the buyer. They don’t want to give a buyer $500,000 to pay for a house that’s only going to be worth $300,000 to them if you don’t make your mortgage payments and they have to sell it. Lenders want to be able to recover their money easily (and quickly).
What Does an Appraiser Do?
An appraiser—usually someone chosen by the lender—determines how much a home is worth. The appraiser will go to the house, look in it to see what features it has and find out what condition it’s in, and then verify all the measurements. The appraiser will also look at all the home’s characteristics, such as what type of heating and cooling system it has, whether parts (or all) of it have been remodeled, and whether there are any obvious safety or health issues.
After the appraiser has been through the home and has checked its exterior, too, he or she writes a report saying how it stacks up to other, similar homes in the area. He or she comes up with a value for the home, and the lender makes a decision (at least in part) by the value the appraiser assigns to the house.
Are You Buying a Home Grand Junction?
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