How Home Appraisals Impact Buyers and Sellers

Essential things to know about real estate appraisals.

Home appraisals are unbiased professional insights into a home’s value based on the property’s condition, location, and features. A professional assessment is required for most real estate transactions to confirm the property is worth at least as much as a mortgage lender will lend to purchase the property.

Similarly, when a homeowner wishes to refinance an existing mortgage, the lender usually orders an appraisal to ensure they are not extending a loan for more than the property is worth.

How an Appraisal Impacts the Homebuyer

When a prospective homebuyer makes an offer to purchase a home, they have already secured mortgage pre-approval in most instances. Any sales offer, minus the down payment, should be no more than the borrowing limit.

After a seller accepts an offer to buy, a crucial step in the closing process is a lender-ordered appraisal.

According to Rocket Mortgage, with an appraisal contingency, the buyer can withdraw from the transaction without losing their earnest money if the appraisal comes in lower than the amount offered. Without this contingency, the prospective buyer could forfeit their deposit.

If the professional appraisal is equal to or higher than the offer to buy and the lender approves, the transaction can proceed, barring any other offer contingencies.

Should the home’s appraisal be lower than the offer, the lender may halt the process. The prospective buyer may then renegotiate with the seller for a lower price acceptable to the lender.

If the buyer or seller believes the initial assessment is wrong, either party can request a second appraisal. However, the lender typically requires compelling evidence to order a second appraisal.

An experienced real estate agent who understands the market and has comparable sales data for the neighborhood can advise the buyer if the initial appraisal is reasonable or if a second one is necessary.

How Appraisals Impact Home Sellers

After making an acceptable offer, assuming the buyer has pre-approval, an appraisal is typically the only thing standing in the way of closing.

Armed with extensive market data, the real estate agent can suggest an optimistic yet realistic price for the property that will align with an appraisal.

It is helpful if the seller is prepared to answer questions the appraiser may have about the property. Additionally, having a list of recent upgrades for the appraiser can be helpful.

If the appraisal comes in lower than the sales price, it is time for the seller to consider if they have overvalued their property. While overvaluing one’s property is common, an objective, unbiased real estate agent can help by suggesting a listing price they believe to be in line with a fair appraisal.

Real Value of an Experience Real Estate Agent

An experienced real estate agent helps homebuyers and sellers with the complexities of a real estate transaction, which can include:

  • Assessing the value of a property.
  • Providing expert advice, support, and guidance through each step of a real estate transaction.
  • Submitting and countering offers to buy or sell a home.
  • Saving buyers and sellers time, money, and headaches.

A vital first step when buying or selling a home is finding and working with a professional real estate agent.


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Michelle Bellagamba

Team Realty and Investment Solutions

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