"The appraisal lets a bank or lender know what the loan collateral will sell for in a worst-case scenario," says Bart Jackson, an appraiser in Charleston, South Carolina, who is also a real estate agent with Charleston Preferred Properties, a residential real estate brokerage firm.
In other words, to go with an extreme example, the bank doesn't want to be stuck with a home they lent the borrower a million dollars for but can only sell for $100,000 because that's all it is worth. The homebuyer shouldn't want that either, of course.
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So it's in everyone's best interest that the appraisal is close to the price that both seller and buyer have agreed on.
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What factors go into deciding the worth of a house? Plenty. "The appraiser is looking at the key characteristics of the property including square footage, number of bedrooms and bathrooms, condition of the home, current recently sold comparables that are close in proximity and health and safety issues," Titsworth says.
That said, most real estate agents will tell you that it's the recently sold comparables – that is, houses that are similar to your own – that are the main factors in appraising a home. It's all about
property values.