Assuming that you are not purchasing your home in cash and are utilizing mortgage financing, your bank will require an appraisal of the home.
An appraisal is paid for by the Buyer, but done for the benefit of the bank. Essentially the bank wants to ensure that the home being purchased is worth the money so that the loan-to-value ratio is not compromised.
Appraisals can only be done by licensed appraisers, and must be arms-length, meaning that neither the Buyer nor the Seller can choose the appraiser. The bank will send the order to an appraisal management company, who will then assign it to an appraiser.
The Buyer should have no role in the appraisal other than paying the appraisal fee. This fee is paid through your mortgage lender or bank. The appraiser will inspect the property inside and out, take photos and measurements, and then submit a report to the bank with his opinion of value. The Buyer should also receive a copy of the appraisal report.
If the appraised value comes in at or above the contractual sales price, then the appraisal contingency is satisfied. If the appraised value comes in below the contractual sales price, then there are two potential outcomes: (1) the seller can agree to reduce the sales price to meet the appraised value or (2) either party may terminate the sale.
A good Buyer’s agent will come to the appraisal inspection prepared with a copy of the sales contract as well as comparable sales to make the appraiser’s job easier.
The appraisal is one of the last hurdles that need to be cleared to get a Buyer to closing. Along with other closing conditions, once the appraisal is completed and in at value, the Buyer and Seller can proceed toward closing.