Frequently Asked Questions About The Appraisal

If you’re buying or selling a home, you’ll likely hear the word “appraisal” once you’re under contract. It’s an important part of many real estate transactions, especially when the buyer is using a mortgage.

So, what exactly is an appraisal, and why does it matter?

What Is a Home Appraisal?

A home appraisal is an independent professional opinion of a property’s market value. A licensed appraiser evaluates the home and considers several factors, including:

- Size and finished square footage
- Overall condition and quality
- Updates and improvements
- Location and lot
- Number of bedrooms and bathrooms
- Recent comparable home sales in the area

The appraiser then uses this information to determine an opinion of the home’s current market value.

Why Is an Appraisal Needed?

When a buyer is financing a home, the lender typically requires an appraisal before final loan approval. The buyer and seller may have agreed on a purchase price, but the lender also wants to make sure the property provides enough value to support the amount being financed.

An appraisal can also give the buyer additional confidence that an independent professional has evaluated the home’s value based on current market information.

Who Pays for the Appraisal?

The buyer typically pays for the appraisal as part of their loan costs. The lender generally orders the appraisal, although the appraiser is an independent third party.

Neither the buyer, seller, lender, nor real estate agents get to determine what the home appraises for.

What Happens if the Appraisal Comes in Low?

Ideally, the home appraises at or above the agreed-upon purchase price and the transaction continues as planned. If the appraisal comes in below the purchase price, it doesn’t automatically mean the sale is over. What happens next depends on the purchase agreement and how the offer was structured.

There may be options to renegotiate the price, challenge the appraisal when appropriate, have the buyer bring additional funds to closing, or find another solution that works for both parties.

This is also why pricing and offer strategy matter from the beginning. Understanding comparable sales and current market conditions can help both buyers and sellers make better decisions before an appraisal ever takes place.

Have Questions About Buying or Selling?

There are a lot of moving pieces between an accepted offer and closing, and the appraisal is just one of them. If you’re considering buying or selling a home, the Sandy Erickson Real Estate Team can help you understand what to expect, prepare for each step, and make informed decisions along the way.

Contact the Sandy Erickson Real Estate Team to start a conversation about your next move.