An appraisal is a licensed professional’s independent estimate of a property’s fair market value used to help lenders, buyers, sellers and investors make informed decisions. It’s evidence‑based — the appraiser inspects the home, researches recent comparable sales and uses standard valuation methods to reach a concluded value.
State‑licensed or certified appraisers perform appraisals. Lenders require them because the appraisal confirms the property is adequate collateral for the loan amount: the lender needs to know the home is worth at least what they’re lending against it.
The lender generally orders the appraisal after a loan application and attaches it to the loan file. Many lenders use appraisal management companies (AMCs) to appoint an appraiser. The appraiser or AMC schedules the inspection with the listing agent or homeowner.
On site the appraiser measures the home, verifies bedrooms/bathrooms, inspects condition (roof, foundation, systems), notes upgrades, counts garages/decks, photographs exterior and key interior spaces, and records the lot and neighborhood characteristics.
After inspection the appraiser pulls recent nearby sales of similar homes (“comps”), active and pending listings, and market trend data. They make adjustments to comps for differences in size, condition, age, features and location to arrive at a reconciled value.
The written report documents the inspection, photos, comps, adjustments, the valuation method(s) used (sales comparison is most common), and the appraiser’s final opinion of value. The lender gets the report; the buyer and seller can usually request a copy through the lender or agent.
The appraisal typically comes after contract acceptance and loan application but before underwriting clears the loan. It commonly arrives within days to a week or two of ordering and must be resolved before final loan approval and closing.
Comps are recent sales of similar nearby homes. Appraisers prioritize closed sales within the last 3–6 months in the same neighborhood or micro‑market. They adjust comp prices for differences in square footage, bedrooms, condition, lot, and amenities to estimate what the subject would sell for.
Appraisers consider vacancy rates, days on market, price trends, nearby amenities, school districts, new construction and local zoning. Rapid market shifts or low inventory can complicate the appraisal and increase reliance on the most recent comparable sales.
Renovations typically add value only if they meet neighborhood standards; high‑end upgrades in a modest neighborhood may not fully pay back. Deferred maintenance lowers value and can lead to required repairs for certain loan types. Unique features (large acreage, custom work) may be difficult to value and can increase appraisal time and subjectivity.
The lender orders the appraisal. The borrower normally pays the appraisal fee as part of loan closing costs (for purchases or refinances). Sellers rarely pay except in special arrangements (e.g., pre‑listing appraisals or seller‑paid buyer incentives).
Turnaround varies by market and property complexity. Typical ranges: purchase appraisals 3–10 business days; refinance appraisals 5–15 business days. Rural, high‑value, or custom homes can take longer.
Typical fees for a standard single‑family home are roughly $300–$700. Factors that increase cost: distance to appraiser, larger or complex properties, multiple dwelling units, drive‑by vs. full interior inspection requirements, rush orders, and local market conditions.
If the appraisal meets or exceeds the contract price, the lender proceeds with underwriting and the loan usually moves forward per the original terms.
A low appraisal means the lender bases the loan on the lower value. The buyer must make up the difference in cash, the seller can agree to lower the price, or the parties can renegotiate contingencies. If unresolved, the buyer can usually walk away if protected by an appraisal contingency.
Loan amount is tied to the lower of purchase price or appraised value. A low appraisal increases the buyer’s cash needed for the same purchase price or reduces the allowed loan amount. Appraisal contingencies outline deadlines and remedies if the appraisal is low.
Common first moves: ask the seller to reduce price to the appraised value, split the difference, or the buyer adds cash to bridge the gap so the lender can fund the loan at the contract price.
Ask the lender to submit a Reconsideration of Value (ROV) with supporting evidence: corrected facts, overlooked comps, or documentation of recent upgrades (permits, invoices, photos). Be factual, avoid pressure on the appraiser, and present clear market data that justifies a higher value.
Second appraisals can succeed if you present new substantive data; they cost more and aren’t guaranteed to come in higher. An appraisal review (internal or independent) checks for errors in the original report and can be faster and cheaper than a full second appraisal.
If your contract includes an appraisal contingency, it typically sets a deadline for resolving a low appraisal (renegotiate, accept, or cancel). Read the contingency language for specifics — some contingencies allow cure periods, others have firm deadlines.
Provide documentation (receipts, permits, photos) and a polite cover note summarizing why specific comps or upgrades are relevant. Do not pressure the appraiser to change conclusions — appraisers must remain independent.
Address obvious deferred maintenance (leaky faucets, burned‑out lights), ensure good curb appeal, clear clutter and personal items during inspection, and make key rooms (kitchen, baths) look clean and updated; small fixes can improve perceived condition.
Appraisers (licensed) do appraisals for lenders; inspectors (home inspectors) do inspections for buyers; real estate agents prepare CMAs to advise pricing; assessors set tax values for municipal purposes. Each serves a distinct role at different stages.
Conventional appraisals follow Fannie/Freddie guidelines and primarily use the sales comparison approach. FHA appraisals include HUD’s Minimum Property Requirements and often require more detailed condition notes. VA appraisals include Minimum Property Requirements and a VA value/eligibility determination; the appraiser may be more stringent about habitability. USDA appraisals check eligibility and value for rural loan programs and can include program‑specific checks.
An appraisal waiver is when a lender or investor allows financing without a new traditional appraisal, relying instead on automated valuation models, prior appraisals, or data analysis. Waivers are granted when risk is low (low LTV, strong data) and when program rules allow automated underwriting to accept no new appraisal.
State licensing boards set appraiser qualifications and continuing education; local building codes and property disclosure laws can affect what an appraiser notes. Some states have additional rules about who may order or communicate with appraisers.
Fictional narrative: Sarah and Miguel contract on a $350,000 starter home. Lender orders an appraisal. The appraiser notes a dated roof and selects comps that sold for $335,000–$340,000. The appraisal returns at $337,000 — below contract. Steps taken: agent presents documented recent upgrades and two stronger comps to the lender for reconsideration; seller agrees to drop price to $340,000; buyer brings $3,000 additional cash to close the gap; loan moves forward.
“An appraisal is an independent, data‑driven estimate of a home’s market value that lenders use to make safe loan decisions.”
“Comp” is short for comparable sale — a recently sold home similar in location, size and features used to estimate value.
Usually yes for most loans; some programs or low‑risk situations allow drive‑by or exterior‑only appraisals, but conventional, FHA, VA and USDA loans typically require interior access.
Appraisals don’t have a universal expiry; lenders often accept appraisals 90 days or less for purchases and may accept older ones for refinances under specific rules. Check your lender’s policy.
You can provide factual documentation (permits, receipts, comps, photos) and correct errors, but you must not pressure the appraiser. Present new evidence through the lender for reconsideration.
The borrower or lender can request a second appraisal, but the lender typically authorizes and pays for it; policies on second appraisals vary by lender and program.
Say: “The appraisal is an independent check that the home’s value supports the loan. If it’s low we’ll present evidence, renegotiate, or review alternatives — and your contract tells us the deadlines.”
Sample cover note (short):
Dear Appraiser: Please find attached a short room list, recent photos of the updated kitchen and two permitted improvement invoices. Relevant recent sales are included for your review. Thank you for your time. — Listing Agent
Sample rebuttal checklist (short):
1) Identify specific factual errors in the report (square footage, beds/baths). 2) Provide three stronger comps with sale dates and photos. 3) Attach permits/receipts for major renovations. 4) Include current MLS market context (pending sales). 5) Submit via lender’s ROV process and request written response.
Immediate next step: collect your documentation now and ask your agent/loan officer to initiate a formal reconsideration or discuss loan alternatives.
