Investor's Loan Guide by Graham W. Parham

Property Appraisal
A property appraisal is generally required by the lender in order to
establish that the value of the home will be sufficient collateral for the amount
of the loan. The appraisal fee is generally paid by the buyer, and many
sometimes required at the time of the loan application, but typically paid at
the loan closing.
A property appraisal is done
by an independent appraiser
who will generally visit the
property and inspect the
interior and exterior. However,
the appraiser is not performing
the same service as a home
inspection.
Home
improvements or the
cleanliness of the interior will
not add to or diminish the
appraisal value. The appraiser
considers many other factors beyond the inspection, to establish the fair
market value such as comparable values, historical sales and market demand
for that area.
Market values fluctuate over time and also vary from neighborhood to
neighborhood causing appraisals to become outdated. Most lenders will
require a new appraisal if any refinancing is done and tax assessors generally
re-assess the property annually. The value established by your lender’s
appraiser will not change the assessment set for property taxes as county tax
assessors do their own property evaluations.
In either case, investors should monitor the appraisals for fair treatment in
relation to similar properties in the surrounding area and in view of the
standards set for appraisers by state licensing boards. For tax purposes, there
is often a protest deadline. In the case of a loan, the buyer should be
comfortable with the appraisal before committing to closing the loan. Any
concerns or complaints should be brought to the attention of the appraiser,
the lender or the state regulatory board. Although the appraisal primarily
protects the lender, it can also benefit the investor by:
• Providing assurances that the home is not over-valued
• Justifying the amount of the loan
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