An appraisal is a professional estimate of a property’s market value. It is performed by a state‑licensed or certified appraiser who evaluates the home’s condition, features, location, and comparable recent sales.

Lenders use the appraisal to determine:

• The home’s fair market value
• Whether the loan amount is appropriate
• The level of risk associated with the loan

Why Do Lenders Require an Appraisal?

Appraisals protect both the borrower and the lender by ensuring:

• The home is worth the purchase price
• The loan amount is not higher than the property value
• The property meets minimum standards for safety and livability

Without an appraisal, lenders cannot confirm the value of the collateral securing the loan.

What Do Appraisers Look For?

Appraisers evaluate several key factors, including:

• Property size and square footage
• Number of bedrooms and bathrooms
• Overall condition of the home
• Lot size and location
• Recent comparable sales (“comps”)
• Upgrades, renovations, and features
• Neighborhood trends

They also take photos, measurements, and notes during the inspection.

Common Appraisal Methods

1. Sales Comparison Approach

Compares the home to similar recently sold properties in the area.

2. Cost Approach

Estimates the cost to rebuild the home from scratch, minus depreciation.

3. Income Approach

Used primarily for investment properties to evaluate rental income potential.

Who Owns the Appraisal?

The lender owns the appraisal because it is ordered for lending purposes. However, you have the right to receive a copy, and lenders must provide it to you.

Can You Use the Same Appraisal With Another Lender?

Sometimes — but not always.

• Conventional loans: Often transferable, depending on lender policies
• FHA loans: Transferable between lenders
• VA loans: Assigned by the VA, not the lender

If you switch lenders, ask whether the appraisal can be transferred.

How Can You Help the Appraiser?

While you cannot influence the value, you can help ensure accuracy:

• Make sure the home is clean and accessible
• Provide a list of recent upgrades or improvements
• Share any relevant neighborhood information
• Ensure all utilities are on
• Fix minor safety issues (smoke detectors, railings, etc.)

What Happens If the Appraisal Comes in Low?

You have several options:

• Renegotiate the purchase price
• Increase your down payment
• Request a reconsideration of value
• Switch loan programs (if applicable)
• Cancel the contract (depending on contingencies)

A low appraisal does not automatically kill the deal — but it does require a strategy.