The Appraisal Process: Why It’s So Important

A skilled appraiser in Los Angeles provides a service that should help make the process of buying and selling a home a smooth transaction.  An appraiser (not to be confused with a home inspector, who reports on the condition of the house) performs an important function in the transaction, as an appraiser provides an unbiased opinion of current market value of a home.

There are three steps in the process:  (1) the inspection, (2) the comparable, and (3) the final appraisal report.  Having a professional come to the home and inspect the property, who knows how the house stacks up against comparable homes in the area, to determine the value of the home and produce the appraisal report, is intended to provide peace of mind to all parties involved in the transaction.

Every home sold in today’s market should be a shining example of the efficiency and fairness of our free market, a system in which prices are determined by unrestricted competition between buyers and sellers.  However, it doesn’t always work that way because, in addition to the buyer and the seller, another party may be involved, such as the mortgage lender.

The mortgage lender is required to protect the bank, and if the bank is not reassured that their money (equity) in the loan’s underlying collateral (in this case the house) covers the mortgage amount, it could potentially be a loss for the bank, which won’t offer the loan until the appraiser confirms the value.

The situation where buyer and seller agree on a fair price, but the bank’s appraiser determines a value that falls short, happens more often than you would think, especially in rising markets.  It’s not necessarily a deal breaker, as a traditional lender will generally only lend up to 80% of the appraised value, so you might need to come up with more cash, but there are other options.  Normally, there is an appraisal contingency in the contract so you could renegotiate the price.  You could also get a second opinion.  Or, you could walk away.

PSL Realty would advise against paying more than the appraised value.  Sometimes, a buyer becomes emotionally attached to the home and thinks that it’s the only house they will ever love.  Even in this situation, we would still recommend trying to make a decision removing your emotions from the equation.  You will never want to pay more than what the home is worth.

A great realtor will advise you on how to best prepare for the appraisal’s visit, as well as make sure the appraiser has all the details needed to prepare the appraisal report.  Should you need any further information in this regard, please feel free to reach out to PSL Realty at any time at 424.333.0557 or plissia@pslrealty.com.

Paolo Lissia

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