Whether you’re buying or selling a home, the appraisal is one of the most important steps in the closing process—and one that can sometimes cause confusion or surprises.
What is an Appraisal? An appraisal is a professional, third-party assessment of a property’s value, typically ordered by the buyer’s lender to ensure the home is worth the loan amount being requested. The appraiser evaluates the home’s condition, size, features, location, and recent comparable sales (or “comps”) in the area.
The appraisal helps protect both the lender and the buyer from overpaying. For sellers, it’s equally important—because if the appraised value comes in lower than the agreed-upon price, it can create a hurdle in the transaction.
If the appraisal comes in below the contract price, a few things can happen:
- The buyer may need to make up the difference in cash.
- The seller may agree to lower the price.
- The two parties may renegotiate to meet somewhere in the middle.
- In some cases, the deal may fall through if no agreement is reached.
As a home buyer, it’s helpful to work with an agent who understands local market values and can guide you on making a smart offer, as well as have a game plan if something comes up with the appraisal.
As a home seller, make sure your home is clean, well-maintained, and that any improvements are documented—these small steps can positively influence the appraiser’s assessment.
If you’re planning to buy or sell soon and want a better understanding of how the appraisal fits into the big picture, we are always here to help.
