If you’re buying your first home, the home appraisal process is one of those steps that gets mentioned early and explained rarely. Here’s what actually happens — and what it means for your purchase.
Why Lenders Require an Appraisal
Your lender is putting up most of the money. Before they do, they need to know the property is worth what you’re paying for it. The appraisal is their independent confirmation — ordered by the lender, paid for by you, performed by a licensed appraiser who has no stake in whether the deal closes.
If the appraisal comes in at or above the purchase price, the loan moves forward. If it comes in low, things get more complicated.
What the Appraiser Actually Does
The appraiser will schedule a property inspection — typically 30 to 60 minutes depending on the home’s size and condition. During that visit they’re documenting square footage, condition, quality of construction, layout, updates, and any functional issues.
After the inspection, they research recent sales of comparable homes in the area — similar size, style, condition, and location — and make adjustments for the differences between those sales and your property. The result is a written appraisal report delivered to the lender.
What Can Affect the Value
A few things first-time buyers are often surprised by:
- Condition matters a lot — deferred maintenance, dated systems, or needed repairs can pull value down
- Location factors are real — backing to a busy road, proximity to commercial uses, or a premium view all factor in
- Above-grade vs. below-grade space — finished basement space adds value, but typically at a lower rate than above-grade living area
- Recent sales set the ceiling — if comparable homes in the area haven’t sold above a certain price, it’s hard for the appraisal to get there regardless of how nice the home is
What Happens If the Appraisal Comes In Low
A low appraisal doesn’t automatically kill the deal, but it changes the math. Your options typically include:
- Renegotiate the purchase price with the seller
- Make up the difference in cash between the appraised value and the purchase price
- Challenge the appraisal with additional comparable sales — this works occasionally if the appraiser missed relevant data
- Walk away if the contract allows it
A Note on AMC Appraisals
Most lenders order appraisals through an Appraisal Management Company (AMC). The AMC assigns the order to an available appraiser — who may or may not know your specific neighborhood well. If you ever have questions about an appraisal on a home you’re buying, a second opinion from a local independent appraiser is always an option.
Questions about the appraisal process? Contact VolkHaus Appraisals at (720) 432-0474 or charles@volkhaus.com.