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It's an objective opinion of value, without an undue influence on a specific transation. It is not an exact science so appraisals on the same property may differ.
For buying and selling purposes, appraisals are usually based on market value-what the property could probably be sold for. Other types of value include insurance value, replacement value, and assessed value for property tax purposes. Re-financing appraisals generally come out higher than purchase appraisals.
Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value.
Appraised value doesn't consider special considerations, like the need to sell rapidly.
Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.
Appriased value is always based on the best and highest use of the property. If the home is being used as a farm and it is worth more as a commercial property, the appriased value should be based on the highest valuation.
Generally, appraisals for loans with very low down payments also include a provision of property condition, to help the lender better understand the investment they are making.
Contact your Colorado Springs REALTOR® for more detailed information. Contact Us!