Some real estate buyers can confuse the fair market value of a
property with its appraisal value. However, the two terms are not synonymous.
Basically, the fair market value of a property is defined as the highest price
a buyer will pay and the lowest amount a seller will receive for a piece of
real estate that neither party is obligated to buy or sell. Area demand for
real estate also factors into the equation. On the other hand, appraisal value
concerns the value of a home as it relates to square footage, condition, and
age. In fact the appraisal value of a home is an important aspect of real
estate financing as it determines how much a buyer can borrow and if he'll also
need to buy private mortgage insurance for the real estate. That's because the
appraisal value also determines the loan-to-value ratio or LTV. If the LTV is
more than 80%, the borrower will need to buy the insurance. Otherwise, he can
forego the coverage. A good lending company can clear up any confusion you may
have about values and costs too.
Mike
Ervin
Senior
Mortgage Banker
NMLS # 282715
Office: 650-735-5261
Cell:
650-766-8500
mike@mikeervin.com
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