How Does an Appraiser Value a Home?
After you have a signed purchase and sale agreement and before your lender releases the funds for your home purchase, they will have an appraisal. The appraiser will research other homes that have sold in the area of the home you have decided to buy. They then look at the homes and how they differ.
As an example let’s say that your home has a two car garage and all of the other comparable properties have a one car garage. A garage could be valued at $5,000 to $10,000 per bay. So the value of one bay would be subtracted from the value of your home which will compensate for the difference in the garage. Other differences in the properties are also assigned a value and then added or subtracted as appropriate.
For all the differences in the homes there are subtractions to value or additions to value to come to a value for your home based on the sold homes in the area. If the appraised value is equal to the agreed upon sale price then the loan will be approved. If the appraised value comes in under the agreed upon price, then a new sale price needs to be negotiated. Speak to your Real Estate Professional on how this would work in your situation.