Foundations
The Home Appraisal, Explained
An independent opinion of value that protects the loan — and what to do if it comes in low.
An appraisal is an independent, licensed professional’s opinion of a home’s market value, ordered by the lender. Its job is to confirm the home is worth at least what is being borrowed against it — protecting both the lender and you from overpaying.
How value is determined
The appraiser compares the home to recent sales of similar nearby properties — ‘comps’ — adjusting for differences in size, condition, features and location. It is an evidence-based estimate grounded in what real buyers have actually paid for comparable homes.
If the appraisal comes in low
- Renegotiate the price with the seller to match the appraised value.
- Bring additional funds to cover the gap between price and value.
- Dispute the appraisal with better comparable sales the appraiser may have missed.
- Restructure the loan, which can sometimes bridge a small gap.
A low appraisal is a negotiation, not a verdict. It gives you real leverage with a seller, and it protects you from overpaying. Handled calmly, it often leads to a better price rather than a dead deal.
Pro tip
On a refinance, a strong appraisal matters just as much — it sets your equity and can affect your rate and whether mortgage insurance applies. Make the home presentable and have a list of recent improvements ready for the appraiser.
Common questions
Who pays for the appraisal?
The buyer typically pays for the appraisal as part of closing costs, and it is ordered through the lender by an independent appraiser. You are entitled to a copy of the report.
What if I disagree with the appraised value?
You can file a reconsideration with supporting comparable sales the appraiser may have overlooked. It does not always change the result, but a well-documented dispute sometimes does.