A home appraisal is an independent professional estimate of a property’s market value — required by virtually every lender before they’ll fund a mortgage. The appraiser inspects the home, pulls comparable recent sales, and writes a report that determines how much the lender will lend. A low appraisal can derail a purchase or refinance; a strong appraisal can unlock better terms. This guide explains how the appraisal works, how to prepare, and what to do if the number comes in too low.
When You’ll Need an Appraisal
- Buying with a mortgage — the lender requires it before closing
- Refinancing — required for most refis (some streamline programs waive it for FHA and VA loans)
- Home equity loan or HELOC — usually required, sometimes via a less rigorous “drive-by” appraisal
- Removing PMI — if you want PMI removed before reaching 22% equity automatically, you generally need a new appraisal showing sufficient equity
- Property tax appeals — an independent appraisal can support a challenge to your assessor’s valuation
- Estate planning, divorce, gift transfers — legal proceedings often require a formal appraisal
Cash buyers don’t legally need an appraisal but often pay for one anyway, especially on high-value purchases.
What the Appraiser Actually Does
Most residential appraisals follow the “sales comparison approach,” supplemented by the cost and income approaches when relevant. The appraiser will:
- Visit the home — typically 30-60 minutes. They measure square footage, count rooms, photograph the interior and exterior, note condition, and check for updates and major systems (HVAC, roof, plumbing). Some lenders accept “desktop” appraisals (no visit) on lower-risk loans.
- Pull comparable sales (comps) — usually three to six recently sold homes within a tight geographic radius (often 1 mile), similar size and condition, sold within the past 6 months
- Adjust comps — subtract value if the comp had something better than your home (bigger lot, newer kitchen, extra bedroom); add value if your home is better
- Write a report — typically 25-35 pages, delivered to the lender (and you, if you paid). Includes the value conclusion, the comps used, the adjustments made, and exterior/interior photos
The appraiser is independent of the lender, buyer, and seller. By federal regulation, lenders cannot pressure appraisers to reach a specific value. The appraiser’s professional opinion is binding for the lender’s purposes.
How to Prepare Your Home for an Appraisal
Appraisers aren’t easily swayed by surface cosmetics, but a well-prepared home photographs better and gets fair credit for upgrades. Reasonable prep:
- Clean and declutter — the appraiser photographs everything for the report. A messy home doesn’t lower the appraisal, but it doesn’t help
- Make sure everything works — appliances, lights, faucets, HVAC, garage door. Visible disrepair (broken windows, leaking pipes, holes in walls) reduces value
- Document improvements — prepare a one-page list of significant upgrades since your last appraisal (or purchase): new roof, HVAC replacement, kitchen remodel, finished basement, new windows, etc., with dates and costs. Hand it to the appraiser
- Pull your own comps — identify 3-5 recent sales of comparable homes in your area. Have the addresses ready. The appraiser may not use them, but the comps you suggest help if they’re appropriate
- Be present, briefly — greet the appraiser, point out improvements, then step out of the way. Don’t follow them around the house
- Major items only — don’t paint the front door the morning of. Repaint should have been done a year ago; a fresh-paint smell can suggest hidden problems
What If the Appraisal Comes In Low?
A “low appraisal” means the appraised value is below the agreed purchase price (for a buy) or below what you expected (for a refi). On a purchase, the lender will only lend based on the lower of the appraised value or the purchase price — meaning the buyer needs to bring more cash to closing, or the seller needs to lower the price, or both, or the deal falls apart.
Options when an appraisal comes in low:
- Renegotiate the price — the seller may agree to drop to the appraisal value, especially in a softer market. This is the most common outcome.
- Buyer brings more cash — bridge the gap with a larger down payment. Works only if the buyer has the funds and still wants the home at the higher price.
- Walk away — most purchase contracts have an appraisal contingency that lets the buyer cancel and recover earnest money if the home doesn’t appraise.
- Request a Reconsideration of Value (ROV) — submit additional comps the appraiser didn’t use, point out factual errors in the report (wrong square footage, missed features), and ask for a re-review. About 1 in 4 ROVs result in a value change. The buyer’s agent typically initiates this with the lender.
- Order a second appraisal — possible but expensive ($400-$600) and slow. The lender may still rely on the first one.
Who Pays
For a purchase: the buyer almost always pays for the appraisal, even though the lender orders it. The appraisal fee ($400-$700 in most markets, more in HCOL areas or for complex properties) is collected upfront (so the lender’s still paid if the deal falls through) or added to closing costs.
For a refi: the borrower (homeowner) pays.
The buyer/borrower is entitled to receive a copy of the appraisal report at no additional cost. Federal regulation requires the lender to provide it at least 3 days before closing.
Educational only. Appraisal requirements, fees, and reconsideration-of-value processes vary by lender and loan program. Specific outcomes depend on local market conditions and the appraiser’s professional judgment. Consult your loan officer or a real estate attorney for advice on your specific transaction.