For the majority of home buyers, a loan is needed for purchasing. Depending on the type of loan, a loan may have a number of prerequisites that must be completed prior to approval. One step to receiving loan approval is the appraisal. Although, certain loan criteria will occasionally permit the lender to waive the appraisal, but most loans do require an appraisal.
After a buyer makes a loan application, the lender will order an appraisal of the property. The appraisal is completed by a certified appraiser that is on the lenders approved list of appraisers. The appraiser typically walks through the house, taking photos, measuring and documenting features and updates of the house. The buyer is responsible for paying for the appraisal. Once the appraisal is completed and received, it must be approved by the lender’s underwriting department. The lender will share the result and copy of the appraisal with the buyer after approval of the appraisal.
If the appraisal is lower than the amount in the purchase agreement the selling agent will be notified and will discuss how to proceed with the buyer. If the appraisal is for a Federal Housing Administration (FHA) or Veterans Affairs (VA) loan, the appraisal is also a general condition inspection and the appraiser may cite certain items that will need repaired or replaced prior to closing. If anything is cited, the appraiser will need to revisit the property and verify that the item(s) has been corrected prior to closing.
The appraisal is just a verification of the value of the home for the lender and the buyer. Purchase appraisals typically come very close to the contract purchase price.