Appraisals

A home appraisal is a professional estimate of a property’s fair market value, performed by a licensed or certified appraiser. Mortgage lenders require an appraisal to confirm that the home’s value supports the loan amount being requested.

Because the property serves as collateral for the mortgage, the appraisal helps protect both the lender and the borrower from financing a home for more than it is worth.

Why Lenders Require an Appraisal

Before approving your home loan, the lender must verify that the property’s value is accurate. The appraisal ensures that the loan amount does not exceed the home’s market value.

This protects all parties involved by:

✔ Confirming the property value supports the mortgage
✔ Preventing buyers from overpaying for a home
✔ Reducing risk for the lender if the loan goes into default
✔ Helping determine the loan-to-value (LTV) ratio

How the Home Appraisal Process Works

During the appraisal process, a licensed appraiser evaluates the property and compares it to similar homes recently sold in the area.

The appraiser typically reviews:

• Property size and layout

• Condition of the home

• Location and neighborhood

• Recent comparable home sales

• Upgrades, renovations, and features

In many cases, the appraiser performs an in-person inspection of both the interior and exterior of the home, documents the property with notes and photos, and prepares a detailed report for the lender.

Types of Home Appraisals

Depending on the loan program and situation, lenders may use different appraisal methods:

Full Appraisal

A complete in-person inspection of the interior and exterior of the property.

Drive-By Appraisal

An exterior-only evaluation combined with market data analysis.

Desktop Appraisal

A remote valuation based on public records and market data without a physical inspection.

How Much Does a Home Appraisal Cost?

The cost of a home appraisal typically ranges between $300 and $500, although it may be higher depending on the property size, location, and loan program.

Government-backed loans such as FHA or VA loans may require specialized appraisals, which can sometimes increase the cost.

What Happens If the Appraisal Is Lower Than the Purchase Price?

If the appraisal value comes in below the agreed purchase price, several options may be available:

• The buyer and seller renegotiate the purchase price

• The buyer pays the difference in cash

• The buyer challenges the appraisal with additional comparable sales

• The transaction may be canceled depending on contract terms

Your loan officer and real estate agent can help guide you through the available options.

When Do You Receive the Appraisal?

Borrowers are typically entitled to receive a copy of the appraisal report before closing, allowing them to review the property’s estimated value and supporting information.

This transparency helps ensure the buyer fully understands the property’s valuation before finalizing the loan.