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A home's value
is determined by an appraiser of course, and the appraiser is using
what we call comparables, or comps, for short.
And those comparables are simply
other properties that have sold within the last six months
that are in their neighborhood
and it has got to be a similar home,
similar square footage,
similar neighborhood
sold in the last, preferrably within the last three months, but perhaps as long as
up to six months
and the appraiser is going to draw comparisons
between the home that the person is buying, or
perhaps refinancing, and all of these other homes, and
use these comparables to determine the value.
And what those other homes sold for is a critical part. So if there was a fire sale
in the neighborhood and someone sold their home
at a really cheap price because they were trying to get out,
that can hurt the homeowners in that neighborhood at least for the
next three to six months if someone else in the neighborhood is trying to get a loan.