Home Appraisal Process: What to Expect and How It Affects Your Loan
Last updated: October 2026 · Editorial standards
A home appraisal is one of the most important steps in the mortgage process — and one of the most misunderstood. Here’s what actually happens and what to do if the appraisal comes in low.
What Is a Home Appraisal?
A home appraisal is a professional opinion of a property’s market value, conducted by a licensed appraiser. Your mortgage lender orders an appraisal to confirm the home is worth at least as much as you’re borrowing.
The lender won’t give you more money than the home is worth — if you’re borrowing $400,000, the appraisal must come in at or above $400,000.
Why Lenders Require an Appraisal
The home serves as collateral for your mortgage. If you default, the lender needs to sell the property to recover its money. An appraisal protects the lender from lending more than the property is worth.
How the Appraisal Process Works
1. Lender orders the appraisal After your offer is accepted, your lender orders an appraisal from an independent, licensed appraiser. You pay the appraisal fee (typically $300–$700) upfront or at closing.
2. The appraiser visits the property The appraiser physically inspects the home, noting:
- Size (square footage)
- Number of bedrooms and bathrooms
- Condition and quality of construction
- Upgrades and features
- Garage, basement, pool, and other amenities
- Neighborhood and location factors
3. Comparable sales analysis (comps) The appraiser finds 3–6 recently sold homes in the area similar to the subject property. They adjust the value up or down based on differences between the comps and the subject home.
4. Appraiser submits the report The appraiser produces a written report with a final value opinion. The lender uses this value to determine the maximum loan amount.
What Appraisers Look For
Appraisers evaluate:
- Location: Neighborhood desirability, proximity to amenities, school district
- Lot and site: Size, shape, usability, landscaping
- Exterior: Condition of roof, siding, foundation, driveway
- Interior: Layout, finishes, kitchen and bath updates, flooring, natural light
- Systems: HVAC, plumbing, electrical condition
- Square footage: Measured by the appraiser, not taken from listing
Note: Appraisers assess market value, not replacement cost or listing price. Your renovations add value only to the extent similar buyers would pay more for them.
What Appraisers Do Not Inspect
Appraisers are not home inspectors. They note obvious visual issues but don’t test systems, inspect roofs closely, or assess structural integrity in detail. You still need a separate home inspection.
What Happens If the Appraisal Is Low?
A low appraisal — where the value comes in below the purchase price — creates a problem: the lender will only lend based on the appraised value.
Example:
- Agreed purchase price: $420,000
- Appraised value: $390,000
- Maximum loan (at 80% LTV): $312,000
- Shortfall: $30,000 — you’d need to cover this out of pocket or renegotiate
Your options when the appraisal is low:
- Renegotiate the price: Ask the seller to lower the price to the appraised value. Sellers often agree rather than start over with a new buyer.
- Make up the difference in cash: Pay the gap between appraised value and purchase price from your own funds.
- Challenge the appraisal: Request a reconsideration of value (ROV) with comparable sales the appraiser may have missed. This doesn’t always work, but it’s worth trying with evidence.
- Order a second appraisal: Some loan programs allow this; costs you another $300–$700.
- Walk away: If your contract includes an appraisal contingency (standard in most purchase contracts), you can withdraw and get your earnest money back.
How to Prepare Your Home for Appraisal (Sellers)
If you’re the seller:
- Clean and declutter
- Complete minor repairs (leaky faucets, broken fixtures)
- Provide a list of recent upgrades with costs
- Have comparable sales ready to share with the appraiser
Key Takeaways
The appraisal protects the lender — and ultimately you — from paying more than a property is worth. A low appraisal isn’t the end of the transaction; it opens negotiation. Knowing your options before it happens helps you respond quickly and effectively.
Frequently Asked Questions
Who pays for the appraisal? The buyer typically pays the appraisal fee, usually $300–$700, at closing or as an upfront fee at application.
Can I see the appraisal report? Yes. Lenders are required to provide you a copy of the appraisal at least 3 business days before closing.
Can the seller see the appraisal? The appraisal is typically shared only with the buyer and lender, not the seller — unless you choose to share it during negotiations.
How long is an appraisal valid? Most appraisals are valid for 90–120 days. If your closing is delayed beyond that, the lender may require a new appraisal or appraisal update.
