Appraisals are imperative in order to secure a loan from any lender. They help determine the market value of the property which is the collateral for the loan. This is important to know, should the worst happen. If a borrower isn’t able to repay the loan and defaults, the property (collateral) is put back on the market to help pay back the debt. But if the lenders lent a lot more than the house was worth in the first place, they incur a loss.
There is benefit for you as a buyer in this aspect as well! Knowing the market value of the home you’re planning to buy will help you in making a decision. If the appraisal comes back higher than what the purchasing price is, perfect. You just gained some home equity!
However, if the appraisal states the property is worth less than what you’re paying for, you have a few options depending on your contract:
Appraisal Fees are paid to Appraiser and any overage is returned to customer.
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