Definition of Appraised Value
An appraised value is the estimated market price of a piece of property that is assessed by a professionally certified home appraiser during the process of securing a mortgage. Request from a lender will complete the appraisal during a chosen period, and the buyer will pay the appraiser.
Why is this term important?
During the underwriting process — when your lender is completing an assessment of all risks — the appraised value of a property is significant in the decision making process for the mortgage amount and what the conditions of that mortgage will be. Based on the assessed value of the home, your lender can then conclude what your loan to value ratio will be. The loan to value ratio is a good indicator of whether or not the borrower is making the right decision and whether the lender is taking too large of a risk. Based on the current market, your appraised value is a factor of the property age, where it is located and even how many bedrooms and bathrooms the home has.
Examples of term
You have approached your lender with a potential property and would like to confirm that your mortgage will suit the needs of this home. Your lender requests you set up and pay for a professional home appraiser to come and look at the property to provide you with an up to date and current market value assessment of the home, otherwise known as the appraised value. Once the appraiser gives you and your lender the results, your lender will approve or disapprove of the property and mortgage coverage or terms.