For a lender to loan money on a property, that property must be appraised at a value that falls between a certain percentage of the sales price. The reasoning is fairly simple: a bank won’t lend $150,000 on a home that’s only worth $120,000 because the odds that it will recoup its total investment should you allow the property to be foreclosed would be slim.
The fact that lenders put so much weight on the appraisal process should give you more reason to do your initial research market more carefully and thoroughly – looking at comps (comparable sales) in the area is a must in any real estate transaction.
