How Does the Appraisal Process Work?
After a purchase contract is signed, the lender orders an appraisal through an appraisal management company. The appraiser visits the property, takes measurements, notes condition, and photographs it. They then analyze recent sales of comparable homes nearby to arrive at a value opinion. The full report is typically delivered within one to two weeks.
What Happens If the Appraisal Comes In Low?
A low appraisal means the lender will only finance based on the appraised value, not the purchase price. Buyers can negotiate the price down to the appraised value, pay the difference in cash, challenge the appraisal with additional comparable sales, or walk away if the contract includes an appraisal contingency. Low appraisals are a common source of deal complications.
What Factors Affect an Appraisal Value?
Appraisers consider square footage, bedroom and bathroom count, lot size, age, condition, location, and recent comparable sales within roughly a half-mile radius. Updates like new kitchens, bathrooms, and energy-efficient improvements can boost value. Deferred maintenance, poor condition, or proximity to undesirable features can lower the appraised value.
Frequently asked questions
Who pays for the home appraisal?
The buyer typically pays for the appraisal upfront, either at application or at closing. Costs range from $300 to $700 depending on the property size, location, and complexity of the assignment.
Is a home appraisal the same as a home inspection?
No. An appraisal determines market value for the lender. A home inspection evaluates the property's physical condition for the buyer. Both are common in a purchase transaction, but they serve different purposes and are ordered separately.