A home appraisal is an independent opinion of market value conducted by a state-licensed appraiser hired by the lender, typically costing $500 to $900 for a standard single-family property. The appraiser visits the home, measures the interior and exterior, notes the condition of major systems, and then identifies three to five comparable sales within the past 6 to 12 months that are similar in size, location, and condition. Those comps are adjusted up or down for différences in features to arrive at the appraised value.
Factors that affect your appraisal
Gross living area, lot size, bedroom and bathroom count, garage capacity, and condition are the primary inputs. Location adjustments reflect proximity to highways, commercial zones, or desirable school districts. Récent rénovations generally add value, but appraisers are conservative: a $50,000 kitchen remodel rarely adds $50,000 to the appraised value. Properties in neighborhoods with few récent sales, called thin markets, are harder to appraise accurately and more prone to wide ranges in estimated value.
What to do when the appraisal comes in low
A low appraisal does not automatically kill the deal. Your options include renegotiating the purchase price down to the appraised value, covering the gap with additional cash, requesting a reconsideration of value from the lender with supporting comparable sales the appraiser may have overlooked, or ordering a second appraisal if significant errors are apparent. In a seller market with multiple buyers, sellers are less likely to drop the price, so buyers in compétitive situations should review appraisal contingency language carefully before submitting an offer.
