An appraisal is the professional assessment of a property’s fair market value. Buyers need it to secure financing, sellers to set realistic prices, and investors to gauge potential returns. Understanding the appraisal process helps all parties avoid surprises and negotiate from an informed position.
Lenders rely on appraisals to confirm that the loan amount matches the property’s value. A high appraisal can strengthen an offer or justify a higher list price; a low appraisal may trigger renegotiation or require additional funds from the buyer.
A real estate appraisal is a systematic process conducted by a licensed appraiser to determine a property’s likely sale price under typical market conditions.
The goal is to provide an unbiased, data-driven opinion of value—known as fair market value—to protect lenders, buyers, sellers, and investors.
Appraisers hold state licenses or certifications, complete specialized training, and adhere to Uniform Standards of Professional Appraisal Practice (USPAP). They must document education, pass exams, and log supervised experience.
Appraisers focus on value. Inspectors assess condition and safety; agents and brokers provide market advice and comparative analyses but cannot issue formal appraisals for lending purposes.
Typically, the lender orders the appraisal after loan application. Buyers usually pay a fee—commonly $300–$500 for a standard home.
The appraiser examines interior and exterior features, measures square footage, notes upgrades or defects, and documents overall condition with photos.
Using the sales comparison approach, the appraiser identifies nearby homes with similar size, age, and features. Adjustments account for differences like extra bedrooms or recent renovations.
Data is compiled into a standardized form—often the Uniform Residential Appraisal Report (URAR)—including descriptions, photos, maps, and the final value opinion. Delivery usually takes 3–7 days after inspection.
Schools, crime rates, amenities, and future development plans impact desirability and value.
Well-maintained homes with modern updates typically appraise higher than older, unrenovated properties.
Square footage, room count, and efficient floor plans factor into the final value.
Sales of similar properties in the past 3–6 months provide the benchmark for value estimations.
Inspections focus on structural and mechanical condition; appraisals determine market value.
CMAs are informal value estimates by agents for pricing strategy. Appraisals are formal, lender-approved reports by licensed professionals.
Listing price is the seller’s asking amount. Market value is the price a buyer will pay under normal conditions. Appraisal value is the appraiser’s unbiased opinion of that market value.
Most residential appraisals cost $300–$500; complex properties can exceed $1,000. Borrowers usually pay at ordering.
Scheduling takes 1–3 days, inspection 30–90 minutes, and report delivery 3–7 days post-inspection, for a total of 7–10 days on average.
If the appraisal is below the contract price, lenders base the loan on the lower value, requiring buyers to cover the difference or renegotiate.
A supportive appraisal can validate a higher list price and deter buyer requests for concessions.
Cash buyers use appraisals to confirm they’re not overpaying and to project potential resale or rental income.
Options include asking the seller to lower the price, the buyer covering the shortfall, or invoking a financing contingency to exit the deal.
A high appraisal creates instant equity, strengthens refinancing prospects, and can support multiple offer scenarios.
Discrepancies in comparable sales, data entry mistakes, or failure to note significant upgrades are valid reasons to challenge.
Review the report, gather additional comps, submit a Reconsideration of Value package to the lender, and request a second review.
Provide clear documentation—photos, sales data, floor plans—and explain why the omitted or misadjusted comps better represent value.
Lenders typically assign appraisers to meet independence requirements, though they may consider a borrower’s suggested panel.
Not always, but cash buyers often order appraisals to verify value and minimize investment risk.
From order to delivery, most residential appraisals take about 7–10 days.
Yes. Depreciation factors and deferred maintenance can reduce value unless offset by significant upgrades.
Appraisals ensure fair pricing and protect all parties in a transaction. Prepare by keeping records of upgrades, maintaining the property, and being ready to provide relevant sales data.
Jordan agrees to buy a suburban home for $400,000 with a lender-ordered appraisal. The appraiser inspects the property, reviews recent sales of similar houses at $380,000–$395,000, notes Jordan’s new kitchen remodel, and reports a value of $392,000. Jordan must cover the $8,000 gap or renegotiate the price before the lender approves the mortgage based on the appraised value.
