What to Expect in a Real Estate Appraisal
Buying, selling, or refinancing a home often involves a critical step: the real estate appraisal. For many, it’s a confusing part of the process—what exactly does it entail, and how can it affect the outcome of a real estate transaction?
A real estate appraisal is not just a formality; it plays a pivotal role in determining the fair market value of a property. Whether you're a buyer trying to secure a mortgage, a seller hoping to get top dollar, or a homeowner refinancing, understanding the appraisal process is essential.
In this blog, we’ll break down what to expect in a real estate appraisal, how it works, what factors influence the outcome, and how to prepare—so you’re not caught off guard.
What Is a Real Estate Appraisal?
A real estate appraisal is an impartial professional assessment of a property’s value. Conducted by a licensed appraiser, this valuation helps lenders, buyers, and sellers determine whether the price of a home aligns with current market conditions.
Lenders require an appraisal before issuing a mortgage to ensure they’re not lending more than the home is worth. For buyers and sellers, it ensures the transaction is based on a fair and realistic value.
When Is an Appraisal Needed?
Appraisals are most commonly required in the following scenarios:
Purchasing a home (especially with a mortgage)
Refinancing a mortgage
Home equity loans or lines of credit
Divorce settlements or estate divisions
Selling a home without a real estate agent
In most purchase agreements, an appraisal contingency allows the buyer to renegotiate or walk away from the deal if the appraisal comes in lower than the purchase price.
The Appraisal Process: Step-by-Step
1. Ordering the Appraisal
Once a home goes under contract or a refinancing application is submitted, the lender orders the appraisal through a third-party appraisal management company (AMC). The appraiser is then assigned to evaluate the property.
2. Scheduling and On-Site Inspection
The appraiser schedules an appointment to visit the property. During the inspection, they assess:
Square footage
Number of bedrooms and bathrooms
Layout and design
Condition of interior and exterior
Construction quality and materials
Renovations or upgrades
Curb appeal
Safety and building code compliance
Photos and notes are taken to document all observations.
3. Market Research and Comparables
After the inspection, the appraiser researches comparable properties (also known as “comps”)—similar homes recently sold in the same area. Adjustments are made based on differences in size, age, location, or features.
This analysis plays a major role in determining the home’s final valuation.
4. Final Appraisal Report
The appraiser compiles all findings into a detailed report, which includes:
Property description and condition
Market data and comparable sales
Neighborhood information
Final appraised value
Notes on methodology used
This report is sent to the lender and often shared with the buyer and seller.
What Affects the Appraised Value?
Several key factors influence a property's appraised value:
1. Location
Proximity to schools, parks, transportation, shopping, and low-crime neighborhoods boosts value.
2. Comparable Sales
Recent sales of similar properties (ideally within 6 months) set the baseline for valuation.
3. Home Size and Layout
Square footage matters, but so does layout. Functional floor plans tend to be more desirable.
4. Condition and Age
Well-maintained homes with modern systems and updated interiors usually appraise higher.
5. Renovations and Upgrades
High-quality improvements like kitchen remodels, new roofing, or energy-efficient systems can increase value.
6. Market Trends
Appraisers consider current supply and demand in the local market, which can drive prices up or down.
What Happens if the Appraisal Comes in Low?
If an appraisal is lower than the purchase price, it can disrupt the deal. Here's what typically happens:
For Buyers:
Renegotiate the price with the seller
Pay the difference out of pocket (if possible)
Request a second appraisal or appeal the report
Cancel the contract (if there’s an appraisal contingency)
For Sellers:
Lower the price to match the appraised value
Challenge the appraisal with better comps or evidence
Wait and relist in a stronger market
A low appraisal doesn’t always kill the deal, but it requires quick, informed decision-making from both sides.
How to Prepare for a Successful Appraisal
If You’re a Seller or Homeowner:
Clean and Declutter: First impressions count—even with appraisers.
Complete Minor Repairs: Fix leaky faucets, broken tiles, or squeaky doors.
List Upgrades: Provide a list of all recent improvements with dates and costs.
Boost Curb Appeal: Tidy up the lawn, paint the front door, and clean up outdoor areas.
Provide Comps: Share recent nearby home sales with the appraiser if you have access.
If You’re a Buyer:
Review the Report Carefully: Make sure the data is accurate.
Ask Questions: Don’t hesitate to seek clarification from your agent or lender.
Understand Your Options: Know how contingencies and appraisal gaps affect your loan.
Appraisal vs. Home Inspection: What’s the Difference?
While both are crucial, they serve different purposes:
| Aspect | Appraisal | Home Inspection |
|---|---|---|
| Purpose | Determine value | Identify condition/issues |
| Required By | Lender | Buyer (optional) |
| Focus | Market value | Structural integrity, safety, systems |
| Outcome | Final valuation report | Detailed condition report |
It’s common for both to be conducted during a purchase transaction.
Conclusion
A real estate appraisal is one of the most important steps in any real estate transaction. It protects both lenders and buyers by ensuring a property is worth what’s being paid for it. By understanding what to expect—how appraisers evaluate homes, what affects value, and how to prepare—you can approach the process with confidence.
Whether you're selling, refinancing, or buying a home, staying informed about the appraisal process helps you avoid surprises, protect your investment, and make smarter real estate decisions.
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