When it's Appraisal Time

Buying your next home can be a complex process with many important steps. You will probably look at many homes before finding the right one, and then you'll submit a purchase offer. After one or more counteroffers, and after the purchase offer has finally been accepted -- congratulations, you have almost bought a home.

There are still several steps necessary, which must take place to satisfy the conditions of the purchase agreement. The first of these steps is getting the appraisal done. In most instances, your lender will only loan about 80% - 90% of the value of the loan. Then you, the buyer must come up with the balance, or the down payment. And, the key to this is still the appraised value of the property.

A licensed real estate appraiser performs this service. And the lender, in most circumstances, will want to use their own appraiser. To arrive at the appraised value of the property the appraiser will assess the property using a complex set of criteria. Technically, this value is just the opinion of the appraiser of what the property is worth, but the result of the appraisal is pivotal when it comes to getting your home loan.

If the property appraises for less than the agreed-upon purchase price, then you'll have decisions to make. The bank will probably still loan you the money, but only a percentage of it. You can still buy, but you will have to make up the balance in some other way. Alternatively, you may allow the purchase agreement to lapse and keep looking at other properties. (Remember, if the purchase agreement lapses because the property doesn't appraise to the purchase price, the buyer's money should be returned.)

If the property does appraise, the deal moves forward. Still on the agenda as you move towards closing are the home inspection and title search. But, the appraisal is the most important condition met in the purchase agreement. It can make or break the deal, depending upon the results. And once the property appraises, you are well on the way to closing. Congratulations!