Sometimes it can be hard to understand appraisals as a consumer. I'm going to explain why we need them, how they work and why they can become an issue.
Appraisals were designed for 3 primary reasons:
1. Establishing a value for the home that helps consumers feel confident in the purchase price of a property.
2. When a lender is loaning money to a purchaser of a home, the lender needs assurance they are not lending more money than the value of the home.
3. Lenders get insurance on their loans and/or often they sell them. In order to get this insurance or to sell their loans they need an appraisal to show the amount they have lent is not more than the value of the home.
Stay tuned for for the next tip on appraisals.
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