The Home Appraisal Process Explained
Whether you're buying or selling, the appraisal is a critical step that can affect the outcome of your transaction. Understanding how appraisers work — and what to do when the number isn't what you expected — will help you navigate this process with confidence.
When a buyer is financing a home purchase, the lender requires an independent appraisal before they'll issue the loan. The appraisal protects the lender from loaning more money than the property is worth — and it protects the buyer from dramatically overpaying. Understanding how the appraisal process works helps both buyers and sellers set realistic expectations and respond effectively if the value comes in unexpectedly.
Who Orders the Appraisal?
The buyer's lender orders the appraisal through an Appraisal Management Company (AMC) as required by federal regulations implemented after the 2008 financial crisis. This system is designed to prevent any party from directly influencing the appraiser's independence. The appraiser is assigned by the AMC, not selected directly by the lender, the agent, the buyer, or the seller.
The buyer typically pays the appraisal fee upfront, outside of closing, ranging from $500–$700 for a standard single-family home in the Massachusetts market.
When Does the Appraisal Happen?
The appraisal is ordered after the offer is accepted and typically conducted within 1–2 weeks, depending on appraiser availability in the local market. The appraisal report is usually delivered to the lender within 3–5 business days of the site visit. The full appraisal process commonly takes 10–14 days from ordering to delivery of the report.
What the Appraiser Does
The appraiser will schedule a time to visit the property (usually 30–60 minutes for a typical single-family home) and examine:
- Gross living area (measured using exterior dimensions)
- Number of bedrooms and bathrooms
- Overall condition (graded on a scale from Condition 1 through Condition 6)
- Quality of construction and finishes
- Functional utility — does the layout make sense?
- Any additions, improvements, or renovations (permitted vs. unpermitted)
- Basement, garage, and outbuildings
- Lot size and site features
- Exterior condition and curb appeal
The appraiser is not a home inspector — they are not testing systems or identifying defects. However, they will note any obvious property condition issues (a damaged roof, visible mold, broken windows) that could affect value.
Have questions about the appraisal process?
Susan helps buyers and sellers understand exactly where they stand before and after an appraisal — and negotiates effectively when the numbers don't align. Reach out today.
Contact SusanThe Sales Comparison Approach
For residential real estate, appraisers almost exclusively use the Sales Comparison Approach — also known as the "comps" method. The appraiser identifies 3–5 recently sold properties that are similar to the subject property in location, size, age, and condition. They then make adjustments for differences between the comparables and the subject property:
- More bedrooms than a comparable: positive adjustment
- Smaller square footage than a comparable: negative adjustment
- Updated kitchen vs. outdated kitchen: positive adjustment
- No garage where comparable has one: negative adjustment
The adjustments are added to or subtracted from the comparables' sale prices to arrive at an indication of value for the subject property. The appraiser reconciles the indications from all comparables to reach a final opinion of value.
Factors That Influence Appraised Value
Sellers and their agents can influence the appraised value — not by pressuring the appraiser, but by ensuring the appraiser has complete information:
- Provide a list of all improvements made in the past 5–10 years, with approximate costs (new roof, updated kitchen, new HVAC, etc.)
- Note any features that may not be obvious (radiant heat, smart home systems, energy efficiency upgrades)
- If there is a pending permit or one that was recently closed for an improvement, have documentation available
- Ensure the home is accessible — clear access to attic, basement, mechanical spaces
- Have a list of comparable sales your agent believes support the purchase price available to present to the appraiser
Your agent can also be present at the appraisal appointment to provide context, answer questions, and ensure the appraiser has access to the full property.
What Happens If the Appraisal Comes In Low?
A "low appraisal" — where the appraised value is below the agreed purchase price — creates a gap that must be resolved. There are several options:
Option 1: Renegotiate the Price
The most common resolution: the buyer and seller agree to lower the purchase price to the appraised value. This is equitable if the market data genuinely supports the appraised value.
Option 2: Buyer Pays the Gap in Cash
If the buyer has sufficient liquid funds, they can pay the difference between the appraised value and the purchase price out of pocket. The lender will still only loan based on the lower appraised value — the buyer must cover the gap.
Option 3: Split the Difference
Buyer and seller each compromise — the seller accepts a lower price and the buyer contributes additional cash — meeting somewhere between the appraised value and the original purchase price.
Option 4: Challenge the Appraisal (Reconsideration of Value)
If you believe the appraiser made factual errors or overlooked relevant comparable sales, you can submit a formal Reconsideration of Value (ROV) request through the lender. This must be supported by specific factual evidence — not just the argument that the market is hot. Your agent can compile supporting comparable sales to present. ROVs are successful when there are genuinely stronger comps the appraiser missed.
Option 5: Order a Second Appraisal
If the ROV is unsuccessful and the parties cannot agree, the buyer may be able to request a second appraisal — though lenders are not obligated to agree, and there is no guarantee the result will be higher.
Option 6: Exercise the Appraisal Contingency
If the buyer included an appraisal contingency in their offer and the gap cannot be resolved, the buyer may exercise that contingency, cancel the transaction, and receive their earnest money deposit back.
Cash Transactions and Appraisals
When a buyer pays cash, no lender appraisal is required. Some cash buyers choose to get an independent appraisal for their own protection, but it's not obligatory. In competitive markets, cash buyers sometimes waive appraisals entirely — understanding that they're taking on the risk of paying above independently assessed market value in exchange for speed and certainty of close.