A Common Misconception About The Home Appraisal

Table of contents

The home appraisal is often seen as a major make-or-break moment in the homebuying process. But it’s not as stressful as you might think!

In this article, we’ll break down what you need to know about the appraisal when buying a home, along with a common misconception regarding the factors that impact a home’s appraised value. 

Key takeaways

  • Why do lenders require property appraisals before closing?
  • How much does the home appraisal cost?
  • What does the appraiser look for?
  • What’s a common misconception people have about the factors that affect a home’s appraised value?
  • What happens if the appraisal comes back lower than expected?

Why do lenders require property appraisals before closing?

After the home inspection, your mortgage lender will request a property appraisal of your new home. The reason lenders need property appraisals is to protect the money they lend you to buy your home.

Because this home is going to be your collateral for your mortgage loan, lenders want to ensure that the loan amount does not exceed the home’s appraised value. Meaning the home’s appraised value needs to be high enough to justify the purchase price or loan amount.

How much does the home appraisal cost?

The appraisal will cost around $300 to $450 or more depending on your market. In many cases, the seller may agree to pay for the appraisal.

What’s a misconception people have about the factors that affect a home’s appraised value?

Appraisers will be looking at the overall condition of the home and checking for obvious issues that could diminish the home’s value. 

However, a lot of people make the mistake of thinking that minor cosmetic details have a big impact on the appraiser’s valuation. But the reality is that appraisers aren’t as focused on home features that are easy to change. 

Think of the characteristics of a home that are more long-term and difficult to change. For example:

  • Location
  • Neighborhood amenities
  • Property age
  • Square footage
  • Number of bedrooms/bathrooms

These factors are more fundamental to estimating the property value, and make a bigger difference on the appraisal than features such as crown molding, paint, or even kitchen appliances. 

In addition to the factors listed above, the appraiser will also likely compare similar properties that have sold in that same area within the last year to determine what your new home’s appraised value would be. 

What happens if the appraisal comes back much lower than expected?

Ideally, at the very get-go, the estimated property value was accurate, the asking price was fair, and everything matches up with what comes up on the appraisal. 

But a potential hiccup here is if the home’s appraised value is not high enough to justify the purchase price or loan amount. 

In that case, the lender may not be able to fully approve your home loan, which could delay closing, but it’s not necessarily a deal breaker. 

Keep in mind, your mortgage advisor and your realtor should be well-versed in the appraisal process.

They should be well aware of this potential hurdle, so if the appraisal does come back lower than expected, they should be able to work with you to find a solution.

For example: 

You and your realtor can renegotiate with the seller. Your realtor can ask the seller to lower the purchase price, which in turn would lower the home loan amount. 

Another option is to order another appraisal and contest the original appraisal.

This might happen if the lender thinks that the first appraisal missed some important details and should reconsider additional factors there. In that case, ordering a new appraisal might make sense in that situation.

But this is why you should talk to your realtor about including an Appraisal Contingency in your offer. 

If this appraisal is a total deal breaker that prevents you from closing on your home, then with that Appraisal Contingency, you can back out of the deal without losing your earnest money.

Home Appraisal Summary

  • The reason lenders need property appraisals is to ensure that your home’s appraised value is high enough to justify the loan amount. 
  • The appraisal will cost around $300 to $450 or more depending on your market. In many cases, the seller may agree to pay for the appraisal. 
  • Appraisers will mostly be looking at long-term characteristics that are harder to change such as: location, square footage, number of bedrooms/bathrooms, property age, neighborhood amenities. They will also compare similar properties that have sold in that same area within the last year. 
  • If the appraisal comes back lower than expected, you and your realtor can negotiate with the seller, or your lender may potentially order another appraisal to contest the original one. 
  • Worst case scenario (if the appraisal ends up being a total deal breaker), having an Appraisal Contingency in your offer protects you, so you can walk away from the deal without losing your earnest money deposit.
Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

Connect with the Author:

Recommended Posts

What Our Buyers Think

Jules S.
Read More
"5 star service is what you will get when you work with him!ᅠ Not only does he know his product like no other, he makes a special point of communicating throughout each transaction and his follow up skills are unparalleled. Perhaps most importantly, he delivers on his promises!ᅠ Give him a try for your mortgage needs.ᅠ You will not be disappointed!"
Jeremy H.
Read More
"An outstanding job handling refinances.  One of those knowledgeable, straight-shooters - which is really appreciated when you're shopping for a home loan. He can answer a million of questions with ease.  Looking back at the responsiveness, he was outstanding and you can do everything he suggested."
Jaina D.
Read More
"You can rely on them, very professional and quick in responding to your queries. He is very friendly and makes sure we understand the process and keeps us posted on the status of our loan. His efforts are greatly appreciated."
Eshawn W.
Read More
“By far the best lender we’ve worked with. Got us the best loan amount than any other lender. He worked with us hand in hand, he is professional, and he made the process enjoyable.”
Jaina D.
Read More
"You can rely on them, very professional and quick in responding to your queries. He is very friendly and makes sure we understand the process and keeps us posted on the status of our loan. His efforts are greatly appreciated."
Cass Z.
Read More
“I called looking for information about the process of applying for a mortgage/refinance and am just blown away with how helpful the information I received was!”
Stephanie F.
Read More
“I have hope because of you for making my home ownership dream come true. I feel such a connection with you and am excited to work with you. Have an amazing day!”
Rachel S.
Read More
"Highly ethical, attentive and helpful! A fantastic combination of personable and hard working. He makes everyone feel important and understood."
Cliff S.
Read More
“Hands down the best mortgage professional I’ve worked with in 20 years. Knowledgeable, honest, reliable and above all an outstanding communicator.”
Jose A.
Read More
"He worked on getting the lowest rate and kept me informed on each step of the process from the beginning to closing. Thank You!"
Nicholas H.
Read More
“Thank you for your prompt help and AMAZING assistance. Hands down, best lender I have ever worked with. Top notch!”
Tiffany
Read More
“I would be 100% interested in working more with you! You have proven to be an amazing lender”
Sandy C.
Read More
“Absolutely the most knowledgeable, friendly and honest expert I’ve ever worked with!”
Steve R.
Read More
"A pleasure to work with. He was very prompt and courteous with his responses and genuinely cares about the clients he works with."
Kevin H.
Read More
"Professional, responsive and honest assistance with the whole refinancing process from beginning to end."
Previous
Next

We help you reach home ownership.

No catch. No hidden fees.

Have you served in the military or your community as a healthcare provider, teacher, or first responder? Are you a member of your local union or work for your city government?

Are you looking to buy a home but don’t know where to start when it comes to finding your best home financing options?

At Hero Home Programs™, our teams are dedicated to helping community heroes like you through the home purchasing process by finding the best grants, rebates, and loans in your area in order to maximize your savings and help you achieve homeownership.

Contact our team today to learn how we can and mortgages can change your life.

Resource Guides

Complete A to Z guides on your home purchase journey.

Learn about the process for getting a home loan

What steps you can take to improve your credit score

Tips and tricks for moving into your new home

Your step-by-step guide for buying a new home

Scroll to Top