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What you need to do

You will be required to do very little during the appraisal process. This is the time the lender hires an experienced property appraiser to determine how much value the property has. The service generally costs a couple hundred dollars. The seller gives permission for the appraiser to enter the home who will afterwards write a full report on the findings, and the buyer will be given a copy of the report.

What the appraiser will do

The appraiser conducts a thorough inspection of the home's value. He will photograph the property and properties like it in the area and compare the sales prices on those homes. The sales agreement often is fully subject to the appraised amount and the process will include, but is not limited, to considering:
o Location
o Marketability
o How well established the neighborhood is
o Proximity to schools, churches, shopping centers, and employment
o The neighborhood's property value trends
o How easily homes in the area are selling
o How much homes in the area are selling for
o Condition of drainage
o All surfaces of the property, including pavement and sidewalks
o Condition of yards and streets
o Whether its located on a flood plain
o The materials the home and property is made of
o The number of rooms and floors in the home
o Conditions of heating and cooling fixtures
o Conditions of plumbing equipment
o Conditions of porches, patios, and decks
o Number of cars available to be parked
o Conditions and amenities of similar homes in area

What the appraisal means

For certain types of government bond loans and other mortgage loans, the sale price must be under the appraisal value of the home in order for the lender to support the full value of the property and in order for the buyer to be qualified for the full value of the loan. If the property's value is less than the agreed sales price, the buyer may have the right to end the sales agreement, the seller may choose to lower the sales price, or some other agreement may be worked out.

A savvy buyer will want to have the sales price considerably lower than the appraised value of the home. This would mean greater equity for the new homeowner, and even the opportunity to sell the property at a higher price sooner than if he had paid the full appraised value.