An appraisal determines the fair market value of a property or home. It assures your mortgage provider that you’re paying a fair price for your new home. Appraisals can also help determine the property taxes you’ll pay as an owner. Lenders will often order an appraisal before closing, and it typically costs a few hundred dollars, paid for by the borrower.
An appraisal shares some similarities with an inspection, but there are a few critical differences. An inspection hones in on the structural and operational aspects of the home, looking for problems that may need to be repaired. An appraisal considers the home’s overall appearance and condition to determine the property value.
If Appraisal is Too Low
If the appraisal comes in lower than the purchase price of the home, the lender may reduce the amount they are willing to lend you. When this happens, you either have to renegotiate with the seller and drop the price or make up the difference with a higher down payment. You may be able to walk away from the sale if you have included those provisions in your offer.