{"id":13968,"date":"2022-04-11T10:28:25","date_gmt":"2022-04-11T17:28:25","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=13968"},"modified":"2026-04-09T05:23:36","modified_gmt":"2026-04-09T12:23:36","slug":"buyer-home-appraisal-tips","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-home-appraisal-tips\/","title":{"rendered":"Home Appraisal Tips for Buyers, Sellers, and Homeowners: Be Prepared for Anything"},"content":{"rendered":"

You might have heard that the home appraisal process<\/a> is nerve-racking for sellers, who are eager to see what financial value a professional appraiser places on their home. But buyers don\u2019t find this process smooth sailing, either!<\/p>\n

With about 40% of Americans in one survey saying that buying a home is the most stressful event in modern life<\/a> \u2014 and 13% of those respondents worrying after the purchase that they overpaid<\/a> \u2014 the more informed a buyer is, the better.<\/p>\n

When associated with a mortgage<\/a>, an appraisal is a risk-prevention step for the lender that ensures the house is worth more than the amount of money that the buyer wants to borrow<\/a>. Although the buyer pays for the appraisal (on average it ranges from between $313 and $420 nationwide<\/a>), the lender is essentially the appraiser\u2019s client and often specifies an \u201cacceptable appraisal<\/a>\u201d as a contract contingency.<\/p>\n

\u201cMost purchase offers are contingent on a property appraising for at least the contract price,\u201d says Mike Ford<\/a>, a general certified real estate appraiser serving greater metropolitan Los Angeles, and a member of the American Guild of Appraisers<\/a>. \u201cFrom that perspective, it is to the borrower\u2019s advantage to know that they are not overpaying for a property.\u201d<\/p>\n

But with appraisals coming in low more recently in the tough market for buyers we\u2019ve seen since the onset of the coronavirus pandemic, some buyers may be feeling extra nervous about the process. In January 2020, a home\u2019s contract price was below the appraised value 69% of the time. By January 2021, that number dropped to 52%<\/a>, analytics and data service provider CoreLogic reported.<\/p>\n

Let\u2019s walk through some home appraisal tips so you can better understand this important step in the purchase process and boost your buying confidence.<\/p>\n

The value of an appraisal<\/h2>\n

An appraisal provides reassurance of a property\u2019s value. Some sellers have their homes appraised before listing them on the market to help arrive at a fair asking price.<\/p>\n

For buyers, an appraisal is a requirement for most mortgages, both government-backed and conventional. Statistics from the National Association of Realtors\u00ae (NAR) show that of all the sales that closed in February 2022, only 22% waived an appraisal contingency<\/a>, indicating that a majority of buyers are still using a mortgage and thus opting for the required appraisal.<\/p>\n

A lender not only uses an appraisal as a quality check but also to arrive at a loan-to-value (LTV) ratio \u2014 this helps lenders evaluate the risk level of the loan. This ratio is calculated by dividing the amount borrowed by a property\u2019s appraised value<\/a>, then expressing the result as a percentage.<\/p>\n

For example, if a property appraises at $200,000, and the buyer has $40,000 to put down on the home, then the buyer will need to borrow $160,000 from the lender: $160,000\/$200,000 = 0.80, or an 80% loan-to-value ratio. If your LTV ratio is at or below 80%<\/a>, you will pay a lower interest rate, plus you won\u2019t have to pay mortgage insurance (MI)<\/a>, reducing your monthly mortgage payments.<\/p>\n

A property\u2019s appraised value also indicates how much you\u2019ll pay in real estate taxes<\/a> \u2014 and gives you an idea of how any improvements you make can add to your home\u2019s equity<\/a>.<\/p>\n

Objective and impartial<\/h2>\n

The Uniform Standards of Professional Appraisal Practice<\/a> \u2014 or quality control standards \u2014 require an appraiser to be impartial and \u201cnot favor a predetermined outcome,\u201d according to the Appraisal Foundation, the nation\u2019s Congressionally authorized source of appraisal standards and qualifications. A lender doesn\u2019t typically contact an appraiser directly but usually uses a third-party appraisal management company to find and hire an appraiser in the buyer\u2019s area.<\/p>\n

Appraisers must never take an assignment contingent upon \u201chitting a number<\/a>,\u201d the Appraisal Foundation says, and they cannot accept assignments where they can\u2019t be independent and objective.<\/p>\n

In the past couple of years, appraisals have been coming in low more frequently than prior research would indicate. In May 2020, 19% of contract home prices<\/a> were higher than their appraisals, per CoreLogic\u2019s report. NAR statistics show that of the 22% of contracts that were delayed but eventually closed in February 2022, 20% had appraisal issues<\/a>.<\/p>\n

One reason appraisals may be coming in low is due to market conditions that have favored sellers over the last couple of years. Inventory has been low since before 2020, when the coronavirus pandemic exacerbated the issue, and most agents expect that trend to continue. HomeLight\u2019s New Year 2022 Top Agent Insights report found that 68% of agents surveyed<\/a> said that inventory was lower than they expected in the 4th quarter of 2021, and 84% said they expect the market to continue favoring sellers in 2022.<\/p>\n

When inventory is low, buyers may get into bidding wars, pushing offers higher than what a property can be appraised for.<\/p>\n

\u201cIn the current market, we are seeing offers made on houses that are considerably more than what can be defended in an appraisal,\u201d says Tom Cullen<\/a>, Chief Appraiser with the Cullen Real Estate and Appraisal, an appraisal company that serves Massachusetts and Rhode Island.<\/p>\n

\u201cBecause listings are in short supply, there is intense competition among buyers. This is promoting buyers to offer higher prices than what an appraisal can justify.\u201d<\/p>\n

That said, in the past appraisers have rarely failed to confirm the contract price. Researchers at the Federal Reserve Bank of Philadelphia found in 2018 that roughly 30% of appraisals precisely equalled the contract price<\/a>, a finding consistent with other studies. Another study of two decades\u2019 worth of appraisals submitted to the Federal National Mortgage Association, commonly known as Fannie Mae<\/a>, found more than 90% valued homes at or above the purchase price<\/a>. In nearly one-third of purchases over the same time period, this study shows appraisals valued properties at exactly the sales price<\/a>.<\/p>\n

\n I\u2019m always prepared to show them why we\u2019re paying more for the house or less for the house, or just generally why my people identified this as something they want to live in for the next number of years.<\/q>\n
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