Another type of valuation the appraisal makes is to determine the replacement value of the home. This is done by determine the value of an empty lot and estimating the cost to build a house of similar size and construction. The house is then cost-reduced by an age factor in order to compensate for relative deterioration and depreciation.
A third factor the appraiser considers is whether the house will be used as a rental property. The appraiser determines the rental income that may be generated. Finally, the appraiser cross-examines these three variables and utilizes his or her own experience to help determine the final value of the home and thus the final home loan amount.
If the value determined by the appraiser and the cost of the asking price are a match, then the loanee is that much closer to receiving Bank of Internet's low mortgage rates.