Apply Now

Do Appraisals Impact Your Mortgage?

August 1, 2013

Clients will often wonder why an appraisal is necessary; isn’t it enough to know what the house next door sold for?

Most homeowners question the value and dollar amount that is placed upon their current property, and typically believe that their home is worth more than what it has been appraised at.

A key starting point is to understand why an appraisal is needed in the first place. An appraisal, in most instances, is completed for the lender’s purpose and not the homeowner. The importance of the appraisal is paramount to establishing a value to the security on which the lender is lending.

A lender wants to know not only the value, but the condition of the security, marketability and the weighting of value of the building structure on the land. In addition, the estimated life of the security is meaningful as well and is one of the factors that will contribute to the total appraisal value of the home.

Appraisals in most cases are completed on a comparison approach, meaning that the value of the property is determined on recent sales in the area for a similar or comparable type of home.

Recent market conditions typically provide insight on how long recent home sales were on the market, how many home sales are available for comparison purposes in the last 30-60 days and how prices of homes sold have become relative to their listing prices.

If you have any questions related to a recent appraisal or if you’re preparing to have a home appraised, don’t hesitate to leave us a Contact Request here or by calling us directly at 416-480-0234.