When you get an offer on your home, the home appraisal can make or break you. Before a lender offers the buyer a mortgage, it's going to want an appraisal so it knows the house is worth enough to serve as collateral for the loan. If the appraisal says the house isn't worth the sale price, the deal may fall through.
Once the lender contacts the appraiser, she'll contact you about scheduling a time to walk through the house and inspect it. The goal is to confirm that the house has all the features you claim it does -- the number of bathrooms, the square footage, the layout. The appraiser also looks for flaws and problems -- a hole in the roof, rickety steps -- and positive features such as a new kitchen remodel or a swimming pool.
Once the appraiser has seen your house, he starts researching recent sales of similar homes. The ideal comparables, or "comps," have similar size and features, sold in the past six months and are within a mile of your home. The appraiser collects information on three or four comps and averages the sale prices to set your home's value. If the comparable homes aren't ideal matches -- different amenities, fewer bathrooms, more square footage -- he has to adjust the sale prices to reflect that.
What Happens Next
If the appraiser tells the lender the home is worth the buyer's offer, the sale proceeds. If the value isn't high enough to justify the price, ask for a copy of the appraisal and look for errors. The appraiser may have missed details about your house, picked a noncomparable house for comparison or maybe even wrote down a wrong number somewhere. If the appraisal holds up, you can lower your asking price or ask the buyer to put up a larger down payment to make up for getting a smaller mortgage.
Theoretically, an appraiser's valuation is completely objective. In practice, Realty Times magazine says, a lot of little things can influence the appraisal. The magazine recommends you prepare for the appraiser's visit just as if she were a potential buyer: Clean up, shampoo the carpets, paint, mow the lawn.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.