After making an offer on my home last year I was surprised to learn that there may have been some discrepancy with the home appraisal. I had been under the impression that the appraiser helped to establish the value of the property, but I have since learned that the price of a house and its current market value have nothing to do with the actual appraisal process. While the bank requires that a house be examined and inspected before they will finalize a loan for the mortgage, the Utah home appraisal system is designed to determine what the house is worth. This can be confusing to some people that do not understand the difference between the worth of something and its inherent value.
As the value of the house I bought was above what I was paying for it, I assumed that my appraisal would be in line with the costs of other houses in the neighborhood. Because I has offered on a short sale property I was able to negotiate a good price for the home, but I had not counted on the home appraisal being lower than the market value. What I learned was that each home is considered for the condition that it is in and the basic cost of materials that are used to build the home, and its total square footage. That means that any upgrades are not included under the Utah home appraisal guidelines and even though I moved into the home with some equity already established I had to sweat over having my loan approved while I waited to learn what my home is worth.
Fortunately everything worked out and I was approved for a mortgage that was below the approved appraisal amount, but not every homeowner can say the same about their property. On the plus side though, there are homes on the market that have a high appraisal rating for the square footage, yet are below the market value because of a foreclosure situation. For buyers that purchasing these houses the banks are willing to offer mortgages that are well below the price of other comparable homes in the same neighborhood.
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