Why does an appraiser need to know the price I paid for a home?

[Matthew W.]

Hey Everyone,

I am getting my house appraised for a HELOC and the appraiser sent me an email asking for the amount I paid for the house. I own the home free and clear. I am curious why what I paid for the house has anything to do with what it is currently worth. If anyone can explain this to me I would greatly appreciate it.

Thanks

Matt

[Michael Ablan]

@Matthew W.  Strange. 

I've had appraisers ask me what I paid, but because I had only just purchased the home 2 months prior and was seeking a loan for much higher than I paid.  Most of the time they just look this up themselves though.

I guess the first thing to understand is that the appraiser is employed by the bank, and thus has fiduciary duty to perform their work in the banks best interest.

The main purpose of their report is to show proof that the house is worth the amount of the loan. 

With that said, one of the fields in their report includes the original purchase price.  Another field is for improvements and renovations.  These numbers, along with current market comps, are used to put together a detailed report to validate the value of the house.

If you bought the house for $50k, didn't do any work to it, but are asking for a loan for $150k, then the appraiser has to prove why you're house is worth so much more than what you paid.  They do this through comps, and establishing a common condition of main components of each house.  

Sorry if my answer isn't very clear.  I hope it offered some insight into the process though.