Price tips

C - The Appraisal: Misleading?

In order to establish a property value, homeowners often refer to an appraisal they had in the recent past. Appraisals became more common as refinancing, home equity loans and lines of credit gained popularity and as more people became aware of their home’s appraised value.

You might have gotten a loan and were pleasantly surprised to find out that your home had greatly appreciated.

Or had it?

Normally, when lenders request an appraisal, they aren’t as interested in the value of the home as they are in their ability to recoup their loan. Many of these appraisals and subsequent loans that were given had little to do with the actual market value of the property.

The inflated appraisal figure arrived at to tap into the value of a home was often influenced by the requested loan amount and the desire of the lenders to loan more money. The approved line of credit or loan amount had more to do with the owner's credit, the strength of equity the owner had in the property, the owner's loan payment history and the owner's ability to repay this new loan.

These items influence the amount of risk a lender will assume in making a loan but have little to do with the home’s real market value.

Older appraisals are poor tools for pricing your home.

More Price Tips