The home appraisal process can feel like a mystery for many first-time homebuyers, who will never work with an appraiser directly during their homebuying journey. To help clear up the process and offer some answers to the most commonly asked questions, here’s a quick guide. Appraisers, feel free to share this resource with your networks to help cast light on what real property appraisal is all about!
What is a home appraisal and why is it necessary?
A home appraisal (aka “real property” appraisal) is an unbiased opinion of value, conducted by a licensed or certified appraiser who knows the local market inside and out. Appraisals are essential for a couple of reasons. First, they protect the lender by making sure they aren't lending more money than the home is actually worth. Second, they protect you, the buyer, from overpaying. For most mortgage types, including FHA, VA, and conventional loans, appraisals are required by law. Ultimately, the goal is to ensure accurate, credible property valuations and promote confidence in the process.
How is the appraised value determined?
Appraisers use a systematic approach to determine a home's value, guided by the Uniform Standards of Professional Appraisal Practice (USPAP). This living document has been shaping appraisal standards for over 30 years and is regularly updated by The Appraisal Foundation. Before starting, the appraiser determines the scope of work and decides which methods to use in their analysis. The most common approach is the sales comparison approach, where the appraiser looks at recently sold properties (aka “comps”) that are similar to the one you want to buy. But an appraiser isn’t just comparing apples to apples and measuring square footage. Market conditions, neighborhood trends, and the property's unique features all factor into the final value. They evaluate everything from the home's condition and location to recent market activity, and use all of those factors and more to inform their opinion of value.
What happens if the appraisal is lower than the purchase price?
When an appraisal comes in lower than the agreed-upon price, it's aptly referred to as a "low appraisal." The lender will only approve a loan based on the appraised value, not the higher purchase price. This means you would need to cover the difference in cash — also known as the “appraisal gap.” Alternatively, you can negotiate with the seller to lower the price to match the appraised value. You could also request an appraisal rebuttal if you believe there was an error. If your contract has an appraisal contingency, you may also be able to walk away from the deal without penalty.
Can I choose my appraiser?
Federal regulations prevent buyers from selecting their appraiser. This is to ensure the valuation is independent and unbiased. The lender orders the appraisal through an Appraisal Management Company (AMC) or an appraiser from their approved list. This system creates a firewall between the appraiser and other parties in the transaction, which prevents any pressure or bias. This independence is ultimately in place to protect you by ensuring an accurate, fair opinion of value.
How long does the appraisal process take?
The timeline can vary, but you can typically expect the process to take 7 to 10 business days from when it is ordered. Most of this time is spent on research, analysis, and writing the report. The actual property visit may only last 30 minutes to two hours. Market activity and property complexity can affect the timing. Simple homes in active markets usually process faster than unique properties in rural areas where comparable sales are scarce. It’s a good idea to build some buffer time into your closing schedule.
How much does an appraisal cost, and who pays?
A home appraisal for a standard single-family home typically costs between $300 and $800. The fee depends on the property's size, location, and complexity. The buyer almost always pays for the appraisal, either upfront or as part of their closing costs. This fee is non-refundable because you are paying for a professional service that has been completed.
What if I disagree with the appraised value?
If you disagree with the appraisal, you have a formal process to address your concerns. You can submit an appraisal rebuttal or a Reconsideration of Value request. This involves providing data and comparable sales that you believe the appraiser may have overlooked. Keep in mind that your personal attachment to a property doesn't translate to market value. The appraiser's job is to reflect what a typical buyer in the current market would likely pay.
What’s the biggest misconception buyers have about appraisers?
Most of the confusion about the role of appraisers stems from the question: who exactly does an appraiser work for? Put simply, appraisers provide their service for the lender, but this is set up in a way that they do so independently of the lender’s influence — they are not subordinates of the lender. Many homebuyers and sometimes even new agents mistakenly believe that mortgage lenders have authority over appraisers, or can contact them directly with questions.
To clarify, The Appraisal Foundation explains:
"Why isn’t the consumer considered to be the client when he or she pays the appraisal fee? Federal banking regulations require the financial institution to be the client, regardless of who pays the fee." In other words, although the buyer pays for the service, they are not the client of the appraisal service.
What advice can you offer buyers to ease the tension?
Appraisers understand that the homebuying process can be stressful. Remember that while the lender is technically the owner of the appraisal, as a borrower, you still have certain rights:
You have the right to obtain your own appraisal, even if you are paying cash for a property.
You have the right to know what type of valuation service is being ordered for your loan.
Additionally, remember that appraisers are independent professionals whose job is to provide an unbiased opinion of value. They are not advocates for the lender, the buyer, or the seller — they are advocates for the truth. By understanding this, you can approach the process with confidence, knowing that the appraisal is designed to protect everyone involved in the transaction.
Appraiser, You Can Demystify the Appraisal Process
As an appraiser, you work tirelessly to research, study the market, and provide opinions that are as objective as possible. Still, it’s a complex process that leaves many people confused. To alleviate the confusion, share this guide with your network and demystify the appraisal process.
