Real Estate Glossary

Understanding Appraised Value

When you're buying or selling a property, it's important to know its value. One way to determine this value is through an appraisal. An appraisal is an assessment of a property's worth by a licensed appraiser. This appraisal is based on several factors, such as the property's location, size, condition, and the current real estate market trends.

The appraised value is the estimated value of a property based on the appraisal. This value is used by lenders to determine the maximum amount they're willing to loan on the property. For example, if a property's appraised value is $300,000, a lender might be willing to loan up to $240,000 (80% of the appraised value) to the buyer.

Why Appraised Value is Important

Appraised value is important for both buyers and sellers. For buyers, it helps them understand the fair market value of the property they're interested in purchasing. This information can be used to negotiate a fair price and avoid overpaying for the property.

For sellers, appraised value can help them set a realistic asking price for their property. Overpricing a property can deter potential buyers and lead to the property being on the market for a long time. On the other hand, underpricing a property could lead to the seller losing out on potential profits.

In addition, appraised value is important for lenders because it helps them assess the risk of the loan. Lenders want to ensure that the amount they loan is reasonable based on the property's value. If the property's value is less than the loan amount, it increases the risk of the loan defaulting, which is a risk lenders want to avoid.