What is Appraised Value
An appraised value is an assessment of a property’s value at a given point in time. A professional appraiser evaluates the mortgage originating process and the appraisal is compensated by the borrower. The appraised value of a property is an essential factor in the investment underwriting process and plays a role in deciding how much capital may be borrowed and under which conditions. For instance, the loan to value ratio is based on the estimated value. Usually, if the LTV is higher than 80%, the lender will ask the borrower to buy private mortgage insurance. If the LTV drops to 78% upon a new appraisal, individual mortgage insurance payments may be eliminated.
The appraised value of a home can vary from the market price and even an agreed upon purchase price for a house. The market price for a property is the amount that buyers are willing to spend to purchase real estate. For instance, a buyer might offer $225,000 for a property that the real estate agent marketed at $240,000. This could drive into negotiations between the seller and buyer with a potential compromise price that could be agreed upon somewhere in-between.