How is Fair Market Value determined with a Home Equity Loan?

[Evan Barney]

Hi I am a little confused on how a home equity loan works. Based on my understanding, the loan amount you can receive is based on the amount of equity present in a property. This is found by subtracting the remaining Loan Amount from the Fair Market Value of the Home. (Feel free to correct me if I am missing anything) My confusion comes from this idea. How is Fair Market Value determined? I know it is calculated during an appraisal process. However, I am unsure of the details that go into the appraisal. I would assume that the value is gated by comps, but I do not know to what degree this affects the final value that a lender comes to. Please let me know your thoughts. Happy holidays!