What Buyers Should Know About Home Appraisals

When you buy or refinance a home, the lender needs to know what it's actually worth. That's where the appraisal comes in. A licensed appraiser evaluates the property and produces an independent opinion of its market value, based on the home's features, condition, location, and what similar homes nearby have recently sold for.

It's worth knowing upfront: the appraisal primarily protects the lender, not you. If you’ve ever defaultedFailing to repay your loan according to the agreed-upon terms, usually after missing payments for an extended period of time.defaultedFailing to repay your loan according to the agreed-upon terms, usually after missing payments for an extended period of time. on the loan, the lender would need to sell the home to recover what it lent you. The appraisal confirms the home is solid enough collateral to justify that risk.

If the appraisal comes back lower than the agreed purchase price, you may have real leverage to renegotiate with the seller.

Who Orders the Appraisal?

The lender orders the appraisal, but the appraiser is completely independent from everyone involved in the transaction. Buyers, sellers, and lenders have no hand in selecting them, which keeps the process truly objective. VA loans work a little differently, requiring appraisers from a VA-approved list, but they're still third-party and held to the same standard of independence.

In most cases, the appraisal is arranged through an Appraisal Management Company, or AMC. This extra layer exists specifically to create a “firewall” between the lender and the appraiser, preventing any pressure or influence over the outcome.

What Does the Appraiser Actually Look At?

Appraisers are evaluating the permanent, structural reality of the home, not how it's decorated or staged.

They look at the age of the home, its square footage, number of bedrooms and bathrooms, the condition of the roof, plumbing, and overall structure, any signs of water or mold damage, and how the location affects value. Renovations can move the needle, and it's perfectly appropriate to give your appraiser a written list of upgrades you've made.

Expert Tip

Just keep in mind that cosmetic improvements carry less weight than structural or functional ones.

The appraiser also pulls comparable sales, known as comps, from the surrounding area to see how your home stacks up against what buyers have actually paid recently. In fast-moving or volatile markets, comps can shift quickly, which is one reason appraisals in competitive markets sometimes surprise people.

How Long Does It Take and What’s the Cost?

After an offer is accepted, the appraisal is typically one of the first things set in motion. Depending on the appraiser's availability, you're (generally speaking) looking at one to two weeks from order to completed report. The cost generally falls between $350 and $500 and is typically paid by the buyer.

Appraisals Are Not Home Inspections

These two homebuying processes are often confused, but they serve very different purposes. A home inspection is a voluntary, detailed look at the home's systems, including the roof, HVAC, electrical, and plumbing, and it's done for your benefit as a buyer.

An appraisal, on the other hand, is required by the lender to issue the loan. One is about your peace of mind; the other is about establishing value. A home inspection for every purchase except newly built homes covered under a builder warranty is generally advisable.

What If the Appraisal Comes In Low?

A low appraisal doesn't automatically derail the deal, but it does require a big decision.

You can negotiate with the seller to lower the purchase price, make up the difference in cash, or in some cases, request a Reconsideration of Value.

Expert Tip

An ROV is a formal process where you ask the appraiser to review their findings, typically by providing additional comparable sales you believe were overlooked.

It's not a guarantee, but it's a legitimate option worth knowing about.

What Happens After the Appraisal?

Once the report is complete, it's shared with you to review and discuss with your Mortgage Banker. From there, it becomes part of your loan file for the underwriterA financial professional who verifies your credit, income, assets, and other information to determine if you will be approved for a loan.underwriterA financial professional who verifies your credit, income, assets, and other information to determine if you will be approved for a loan. to review. If everything checks out, you're one step closer to the closing table, your final walkthrough, and the keys in your hand.

Truthfully, the appraisal process is one of the more misunderstood parts of buying a home, but it doesn't have to be. Your Mortgage Banker is with you through every step, and we're always happy to answer questions along the way! Just give us a ring or shoot us a DM.