Introduction
You’re under contract, you’ve passed the inspection, and now the bank orders an appraisal. What exactly is this, and why does it matter so much?
What is an Appraisal?
An appraisal is an independent assessment of a home’s market value, conducted by a licensed appraiser. Your lender requires it because they want to make sure the home is worth at least what you’re paying for it. They’re not going to lend you $500,000 for a house that’s only worth $450,000.
The appraiser is hired by the lender — not by you or the seller — to provide an unbiased opinion of value.
How Appraisers Determine Value
The appraiser visits the property and evaluates:
The home itself: Square footage, number of bedrooms and bathrooms, overall condition, updates, and any issues.
Comparable sales: Recent sales of similar homes in the area — typically within the last 3-6 months and within a mile or so. These “comps” are the foundation of the appraisal.
Location factors: Neighborhood, school district, proximity to amenities, and local market conditions.
Adjustments: The appraiser adjusts for differences between the subject property and the comps. More bedrooms? Add value. Smaller lot? Subtract value.
What Happens If It Appraises Low?
This is where things get tricky. If the appraisal comes in lower than your purchase price, you have a few options:
Renegotiate the price: Ask the seller to lower the price to match the appraised value. In a buyer’s market, this often works. In a hot market, sellers may refuse.
Pay the difference: If you really want the home, you can pay cash for the gap between the appraised value and the purchase price. Your lender will only loan based on the appraised value.
Challenge the appraisal: If you believe the appraiser missed relevant comps or made errors, your agent can provide additional information and request a reconsideration of value.
Walk away: If you have an appraisal contingency in your contract, you can cancel the deal and get your deposit back.
What Helps a Home Appraise Well
Sellers can help their appraisal by:
- Providing a list of updates and improvements with costs
- Making sure the home is clean and accessible
- Pointing out features the appraiser might miss
As a buyer, you don’t have control over the appraisal — but your agent can provide helpful comps to the appraiser if there are concerns about value.
The Bottom Line
The appraisal protects you from overpaying. If a home doesn’t appraise, it’s the market telling you something. That doesn’t mean you can’t still buy it — but you need to go in with eyes open about what you’re paying versus what it’s worth.
Have questions about how appraisals work or what to expect? I’m happy to explain some aspects of the process and let you speak with an Appraisal Specialist.
Call or text me: (516) 250-4891
Carolyn A. Best
Licensed Real Estate Agent
EXIT Realty Premier
PERFORMANCE…not promises.
