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The Mortgage Appraisal

In today's Boston Globe Sunday Magazine is an article on the mortgage appraiser's visit to see the subject property.

Most offers in Cambridge and Somerville are contingent upon the buyer securing a loan from the bank for a certain percentage of the purchase price, often 80%.

For example, consider a Cambridge condo that is under accepted offer for $500,000. The buyer's downpayment is 20% or $100,000. This means that the loan amount is 80% or $400,000. The mortgage contingency in  the buyer's accepted offer will state that his/her offer is contingent upon the bank agreeing to loan him $400,000.

The bank sends an appraiser to visit the subject property to complete an appraisal report. The purpose of the appraisal visit is for the appraiser to see the subject property and to learn as much as he can about it.

A good listing broker will serve as an expert guide on the appraiser's site visit, pointing out the unique features of the address and any improvements which distinguish the residence.

Also, a good listing broker will review the relevant comparable sale events that the appraiser may wish to consider in writing his report. Comparable sales are crucial, and a good listing broker will be familiar with the relevant comps and be able to comment on them accordingly in relation to the subject property.

The appraiser typically completes his appraisal report within several days of his visit to the property. Unlike a Realtor, who arrives at a range of value, an appraiser in his report determines a specific dollar value for a property - the appraised value.

For sure, the appraiser will know the purchase price the buyer has agreed to pay for the property by having reviewed the executed purchase and sale. The appraiser will also have reviewed the relevant comparable sales.

If the bank finds the appraiser's report and appraised value acceptable, the mortgage commitment process moves forward, with the bank typically issuing a mortgage commitment three to four weeks after the execution of the purchase and sale agreement. In most transactions, the issuance of the mortgage commitment is the final hurdle on the long path to closing.

If you are considering buying or selling in Cambridge, I am here to help. I can be reached at ccherney@hammondre.com or 617-733-8937.  I am a Harvard graduate, a Cambridge resident and a top broker in the city since 1999.

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