Introduction
Shortly after your offer is accepted, your lender orders a home appraisal. The appraisal is a professional opinion of the home's market value conducted by a licensed appraiser, and it's one of the key steps between accepted offer and closing. If it goes smoothly, you'll barely notice it. If the number comes back lower than your purchase price, it can suddenly become one of the most complicated parts of your transaction.
This article explains what the appraisal process looks like from the buyer's perspective, what the appraiser is evaluating, what determines the outcome, and how to manage the timeline so it doesn't delay your closing.
Why Your Lender Requires an Appraisal
Your lender is financing a large portion of your home purchase. The home is the collateral for the loan, if you default, the lender needs to sell the property to recover what they lent you. The appraisal confirms that the home is actually worth what you agreed to pay for it, protecting the lender from over-lending against overvalued collateral.
The appraisal also protects you to some extent: it's a check against paying significantly more than market value for a home, and the appraisal contingency (if you have one) gives you an exit if the number comes back too low relative to your purchase price.
Who Orders the Appraisal and Who Pays
Your lender orders the appraisal, typically through an Appraisal Management Company (AMC) that maintains a pool of licensed appraisers and assigns them to specific orders. This process is designed to maintain appraiser independence; your lender isn't supposed to be able to influence the appraiser's conclusion by selecting who gets the work.
You pay for the appraisal, typically $400 to $700 for a standard single-family home appraisal, though the cost varies by property type, location, and complexity. The fee is usually collected upfront or included in your closing costs.
Because the appraisal is ordered by and technically the property of the lender, a different lender would need to order their own appraisal. If you switch lenders mid-transaction, you may have to pay for a second appraisal.
The Appraisal Timeline
Your lender typically orders the appraisal within a few days of contract acceptance. The appraiser then schedules a visit to the property, which may take a week or more depending on their workload and your market's activity level. After the visit, the appraiser compiles the report, which typically takes three to seven additional business days.
Total time from order to report delivery is commonly two to three weeks, though it can be faster or slower. Appraisal timelines are one of the most common causes of closing delays, a market with high transaction volume and limited appraiser availability can push timelines out significantly. Your agent and lender should be able to tell you what's typical in your market.
The appraisal needs to be completed before underwriting can issue a final loan approval. If the appraisal runs late, everything behind it in the process shifts. This is why your lender should order the appraisal immediately after contract acceptance, not after waiting to confirm other parts of the transaction.
What the Appraiser Does During the Visit
The appraiser visits the property to conduct a physical inspection. This is much less detailed than a home inspection, the appraiser is assessing value-affecting characteristics, not documenting every system and component.
During the visit, the appraiser measures the home, photographs the interior and exterior, notes the number and size of rooms, assesses the home's overall condition, and identifies features that affect value: updates, amenities, lot characteristics, view, and any deferred maintenance or condition issues significant enough to affect market value.
For FHA and VA loans, the appraisal also includes a property eligibility assessment. The appraiser checks for specific health and safety conditions that must be met for the loan to be approved, things like peeling paint, exposed wiring, broken windows, or a non-functional heating system. If the home fails to meet minimum property requirements (MPRs), repairs must be completed before the loan can close.
How the Appraiser Determines Value
The primary method appraisers use for residential properties is the Sales Comparison Approach: comparing the subject property to recent sales of similar properties (comps) in the same area and adjusting for differences.
The appraiser selects three to five comparable sales, typically within the same neighborhood or immediate area, sold within the past three to six months, and similar in size, age, condition, and features. They then make dollar adjustments for differences between each comp and the subject property: if a comp has one fewer bathroom, the appraiser adds a value for the missing bathroom; if a comp has a larger garage, the appraiser subtracts a value for the extra space.
The adjusted sale prices of the comps, reconciled through the appraiser's professional judgment, produce a final value estimate for the subject property.
This process has inherent subjectivity. The selection of comps, the adjustment amounts, and the final reconciliation all involve professional judgment. Different appraisers looking at the same property can reach different conclusions, usually within a modest range, occasionally more significantly. This is relevant when you're considering whether to challenge a low appraisal.
What Affects Appraised Value
Understanding what appraisers look at helps you anticipate how your home will appraise and why.
Location and Neighborhood
The most significant driver of value. School district, neighborhood desirability, proximity to amenities, and specific street or lot position all affect value. Appraisers use comps in the same neighborhood to control for location factors.
Size and Configuration
Square footage, bedroom and bathroom count, lot size, and garage capacity are quantifiable value factors that appraisers adjust for directly when comping.
Condition and Updates
Well-maintained homes in good condition appraise higher than similar homes in poor condition. Updated kitchens, bathrooms, and systems contribute to value. Significant deferred maintenance or major condition issues reduce it.
Recent Comparable Sales
The appraisal reflects what similar homes have actually sold for recently, not what they're listed for, not what the market was doing a year ago. In a fast-moving market, the appraisal may lag behind the most recent sale activity, which can create appraisal gaps even when prices are rising. In a declining market, recent sales showing lower prices will bring the appraisal down relative to older comparables.
Receiving the Appraisal Report
You're entitled to receive a copy of the appraisal report. Your lender should provide it to you within a reasonable time of receiving it themselves. Review it when you get it, even if the value comes in at your purchase price.
Look at the comps the appraiser selected. Are they genuinely comparable to your property in location, size, condition, and age? Look at the adjustments made. Do they seem reasonable? If the appraisal came in at your purchase price, you may not need to scrutinize it closely. If it came in low, understanding the methodology helps you evaluate whether it's worth challenging.
What Happens When the Appraisal Comes In at Value
If the appraisal matches or exceeds your purchase price, the appraisal step is complete and the transaction continues toward closing. Your lender accepts the value, underwriting proceeds, and you don't need to take any action related to the appraisal.
An appraisal that comes in above your purchase price is a nice validation, it means you bought below the appraised value and have instant equity. But it doesn't change your loan terms or closing costs; lenders lend based on the lower of the appraised value or the purchase price.
Preparing for the Appraisal Visit
As the buyer, there's limited action you can take during the appraisal process, it's primarily between the lender, AMC, and appraiser. But a few things can facilitate a smooth process:
- Make sure the appraiser has access to the property. The listing agent or seller's agent typically coordinates access. Confirm this is arranged so the appraiser doesn't experience delays getting in.
- Your agent can provide the appraiser with a list of recent comparable sales and relevant property information before the visit. This is common practice and ensures the appraiser has full context, they're not required to use your agent's comps, but it's appropriate to provide them.
- If the home has had recent improvements not fully reflected in public records, documenting them can help support the value.
Final Thoughts
For most buyers, the appraisal is a background process that concludes without drama. Understanding how it works helps you set realistic expectations about the timeline, understand what the number means when you receive it, and know how to respond if it comes in below your purchase price.
The next article in this series covers exactly that scenario in depth, what to do when the appraisal comes in low and you have options to consider.
Sources & Further Reading
For authoritative information on the topics covered in this article, consult these resources:
