Appraisal
Appraisals estimate property market value. Learn how licensed appraisers evaluate comparables, condition, and location to support mortgage lending.
Definition
An appraisal is a professional, unbiased estimate of a property’s market value prepared by a state‑licensed or certified appraiser. Lenders require appraisals during purchase or refinance transactions to ensure the home is worth at least the loan amount. Appraisers analyze recent comparable sales ("comps"), measure square footage, inspect the property’s condition, and consider factors like location, school districts, and market trends. The resulting appraisal report supports the lender’s decision and protects both buyer and lender from overpaying. If an appraisal comes in below the agreed purchase price, the buyer may need to renegotiate, increase the down payment, or cancel the contract.
Why It Matters
A low appraisal is the most common way a signed contract falls apart after inspection. If a home under contract at $700,000 appraises at $665,000, the lender finances against $665,000, and somebody has to produce the $35,000 gap in cash, cut the price, or walk. A buyer who waived the appraisal contingency owes that money whether or not it exists.
Examples
A Kirkland buyer wins a bidding war at $912,000 with a $25,000 appraisal gap guarantee. The appraisal returns $875,000, and she must bring the full $37,000 difference or forfeit her earnest money.
An appraiser marks a comparable down $18,000 because the subject property backs onto a highway and the comp does not. The seller had been pricing off that comp for a month.
A seller finishes a $60,000 kitchen and expects a matching bump. The appraiser credits $34,000, because the two nearest closed sales with updated kitchens support nothing higher.
Tips
Hand the appraiser a one-page list of improvements with dates, costs, and permit numbers. Nobody is required to go hunting for the work you did in 2019.
If the value comes in low, request the report and check comp selection, square footage, and adjustments. A reconsideration of value backed by two better comps succeeds often enough to be worth the 48 hours.
Do not treat the appraisal as an inspection. The appraiser is confirming value and basic condition for the lender, not warning you that the furnace is 24 years old.
Related Terms
Market Value
Market value is the price a property would fetch in a competitive, open market. Discover how apprais...
Broker’s Price Opinion (BPO)
A broker’s price opinion (BPO) is a quick property value estimate. See how BPOs use comparables and ...
Appreciation
Appreciation is the rise in a property’s value over time. Understand how market forces, location, an...
Ready to Use Your Real Estate Knowledge?
Now that you understand Appraisal, let Wayber help you navigate your real estate journey. Our flat-fee service saves you thousands while providing expert guidance.