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Misconceptions that consumers sometimes have about the appraisal process.

Will the appraisal make sure that I, the buyer, don’t pay too much for the house?

The appraiser’s primary mission is to protect the lender so the lender does not end up owning an overpriced property although it also provides valuable information for the buyer and the seller.

Do appraisers use a specific formula (e.g., price per square foot) to figure out exactly how much each home is worth?

Appraisers take into consideration the location of the home, its proximity to desirable schools and other facilities, the size of the lot, the size and condition of the home itself and recent sales prices of comparable properties, among other factors.

Do appraisers have an obligation to reveal home defects to buyers?

If the buyer is applying for FHA (Federal Housing Administration) mortgage, the appraiser must examine the condition of the house and disclose potential problems but is not obligated for non-FHA mortgages.

Is an appraisal identical to a home inspection?

No, appraisers and inspectors are very different. An appraisal isn’t a substitute for a professional home inspection. The appraiser formulates an opinion of the property’s value for the lender, while the inspector educates the buyer about the condition of the home and its major components.

If the appraiser’s opinion of value is lower than the purchase price, will the buyer be able to purchase the home?

A transaction can sometimes withstand a “low” appraisal. The buyer and seller can split the difference, the seller can reduces the purchase price, the buyer makes a hefty downpayment or a separate escrow account is set up to fund repairs that will increase the value of the home. On rare occasions, an appraiser will reconsider his or her opinion if new evidence supports a higher valuation and sometimes a second appraisal is ordered.