Appraisal, what's the point?

Question

I recently purchased two rental properties, both less than $50,000 each. The appraisals cost roughly $475 each. I'm wondering what was the point? I don't believe they were required to close. Being new to this I did order them. Now I'm reviewing to improve my system to determine if and when an appraisal is appropriate. In this case, this is to buy and hold properties.

TIA

Stephen Rager · Answer

With loans, 20% down on each, I'll go back and ask my lender if they were required or not for the loans.  It may have been required and I wasn't aware.

Stephen Rager · Answer

Thank you for the information everyone.  I follow a plan, do, review and improve the system.  So while reviewing, I'm just verifying the necessary expenses related to the transaction.  The evaluation tools on this site were instrumental in keeping in line with the estimated cost.

Kanwar Sodhi · Answer

Banks require it for the loan, unless your buying it cash then you don't need it but it just gives you assurance if your home value

Jaron Walling · Answer

@Stephen Rager It was required. I've never seen a mortgage approval without one. I'm sure it's possible but you'd need a good track record with the lender. This would include multiple loans, business checking, or savings account.

Jaron Walling · Answer

@Stephen Rager Banks don't just give out loans on blind faith... so they charge for a 3rd party appraisal, check credit, verify income, and approve or decline the loan.

How did you pay for these properties? If you paid cash you don't need an appraisal but I assume you found a great DEAL and know the market.