The "market value" of a home is said to be "that price which a buyer is
willing to pay and a seller is willing to accept . . . ." It is the price on
which all parties in a real estate transaction agree.

There is another value judgment made in most real estate sales. It is called
an "appraisal", and is usually required by the mortgage lender. An appraisal
is conducted by an unbiased third-party, usually an individual certified to
do appraisals.

Appraisals are required by most lenders for their protection and,
ultimately, for the protection of the responsible party, the buyer. The
purpose of the appraisal is to assure the mortgage lender that the price
being paid is no more than the property's fair value.

Mortgage loans are usually based on a percentage of the purchase price, say
80%. For example, a home that appraises for $100,000, might justify a loan
of $80,000. It is very important to the lender that the home is worth the
price paid, otherwise they would be loaning an amount in excess of the
percentage committed.

How are appraisals conducted? First, the appraiser gathers information about
the property being appraised. This includes square footage of the home, lot
size, condition of the home, special features, amenities, and location.

Next, the appraiser compiles comparable data for other similar homes which
have sold recently in the area. Only completed sales are taken into account
by the appraiser.

The property being appraised is then compared with the other homes which
have sold. Adjustments are made based on differences in square footage, the
recency of sales, and condition.

Because the final appraised value is based on completed sales only, it is
assumed that the property would resell, if necessary, at that price. With
that assurance, the lender then makes a permanent loan commitment based on a
percentage of value.