When the buyer and seller come to an agreement on the price of a house, there is one more person who must be
convinced that the house is worth the contract price--the mortgage company's
appraiser.
The appraiser looks for three similar homes that have sold in the same
geo-area within the last six or so months, and compares the sales prices of these
homes with the one you are buying. They make adjustments to account for the
differences in each home/property, and the price for your house will be the average
of the adjusted prices of the other three properties. In subdivisions or condominium
projects where there are many similar properties and plenty of recent sales, the
appraiser's job is relatively easy. In neighborhoods of older houses that have been
renovated or remodeled over the years, it can be like comparing apples and
oranges.
If the appraiser's valuation is lower than the selling price, it can
threaten the transaction if the lender declines the buyer's loan based on the
appraisal. In this case, a knowledgeable Realtor or real estate agent can usually work with the
appraiser to make the transaction work.
