Buying or selling a home is one of the biggest financial moves you’ll make and somewhere in the middle of that process sits a key step, the home appraisal. Whether you’re a first-time homebuyer, a seasoned seller, or simply curious, understanding how appraisals work can save you stress, time, and potentially thousands of dollars. While this is just the tip of the iceberg, here’s some basic information about what appraisals are and how they work!
What Is a Home Appraisal?
A home appraisal is an unbiased estimate of a property’s market value conducted by a licensed appraiser. It’s designed to protect both the buyer and the lender by making sure the agreed upon purchase price is fair compared to the home’s true value.
Why Appraisals Matter
- For Buyers – An appraisal confirms that you’re not overpaying for the home.
- For Sellers – It validates your asking price and can support negotiations with buyers.
- For Lenders – It protects them from the risk of lending on a property that is not priced appropriately .
How the Appraisal Process Works
1. Appraisal Is Ordered
Once you’re under contract, the lender orders the appraisal through an appraisal management company (AMC). You don’t pick the appraiser — this ensures impartiality.
2. On-Site Inspection
The appraiser visits the property to evaluate:
- Square footage and layout
- Condition of the home (inside and out)
- Upgrades, renovations, or damage
- Location, neighborhood, and surrounding amenities
3. Comparable Sales Analysis
The appraiser researches recent comparable sales (similar homes in the same area) to determine market value. This step is critical, as it ensures your home’s value is based on actual market data.
4. Final Report
The appraiser provides a detailed report with the home’s estimated value, photos, and reasoning behind the valuation.
Possible Outcomes
- Appraised Value Meets or Exceeds Sale Price – Great news! The deal moves forward without issue.
- Appraised Value Is Lower Than Sale Price – This can cause problems with financing, but there are options:
- Renegotiate the price.
- The buyer pays the difference in cash.
- Dispute the appraisal with additional evidence.
- Renegotiate the price.
How to Prepare for an Appraisal
For Sellers:
- Clean and declutter to make the home presentable.
- Make small repairs and touch-ups (this should be done prior to listing).
- Provide a list of upgrades to ensure the appraiser doesn’t miss any important info.
For Buyers:
- Understanding the process and timelines to avoid surprises.
- Work closely with your agent if the appraisal comes in low.
Final Thoughts
The home appraisal might feel like just another box to check, but it’s one of the most important steps in the real estate process. By understanding what it is, how it works, and how to prepare, you’ll be in a much stronger position. Teaming up with a real estate professional will help ensure that this step, along with the many others, goes smoothly.