An appraisal is an extremely important part of the Reverse Mortgage process and it is helpful to know how this process works and how a value for your home is determined.

When an appraisal is ordered the appraiser will either go to the town hall where you live or to an online database to find out a number of important things about your house. These include the style of the house, the square footage, the number of rooms, bedrooms and baths, and any amenities your house may have like fireplaces, finished basements, etc.

Next he will either go online or to the Town Hall to find recent sales of comparable houses. Lenders like to have the recent sales to be within the last six months. The houses selected should be identical or very similar in style, so if you live in a ranch style home, the appraiser will not use the colonial next door to you that sold three months ago. He will use other ranches. The comparable will need to be similar is size and within a mile of your house. So don’t be surprised when the appraiser doesn’t use the ranch across the street that has 2,000 square feet and your ranch has 1,300 square feet. They aren’t comparable. It’s important to keep this in mind so as to have a realistic expectation of the result of this part of the process.

After gathering all the information he needs about your house and the comparable houses, the appraiser will enter it all into his software and make adjustments for significant difference. At the end of the process he will arrive at a value based on the value of these comparable sales. This is referred to as “an opinion of value”, and this opinion can vary somewhat depending on the appraiser, but mostly on the recent sales of “comparable” homes in your immediate area.

So bear this in mind if the Real Estate market in your area is slow and prices have been declining. You need to be realistic about what your house is worth in the current market and to make your decision based on the facts and not wishful thinking.

At present, mortgage lenders do not directly select the individual appraiser who will appraise your house. This is because the laws have changed and all requests for an appraisal go through a clearing house. This change insures that appraisals will be more accurate.

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