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A home appraisal is an independent assessment of a property's market value, required by virtually every mortgage lender. The appraisal protects both the lender and the buyer by ensuring the home is worth at least as much as the loan amount. For buyers, the appraisal is often the most nerve-wracking step in the home-buying process — especially in competitive markets where offers may exceed asking price. Understanding the process helps you prepare and respond effectively if the number comes in lower than expected.

What Appraisers Evaluate

The appraiser conducts a physical inspection of the property and researches comparable sales. During the inspection (typically 30-60 minutes), they assess the home's condition, size (measuring square footage), number of bedrooms and bathrooms, lot size, upgrades and improvements, overall quality of construction, and any obvious defects or safety issues. They photograph the exterior, interior, and surrounding neighborhood. For FHA and VA loans, appraisers also check compliance with minimum property standards — chipped paint, broken handrails, and structural issues can trigger required repairs before closing.

How Value Is Determined

Appraisers use the sales comparison approach for most residential properties. They identify 3-6 comparable sales (comps) — properties similar in size, condition, age, and location that sold recently (ideally within the past 90 days and within a mile of the subject property). They then adjust for differences: a comp with a garage that the subject lacks gets a negative adjustment, while a comp with fewer bathrooms gets a positive adjustment. The result is a range of adjusted values, from which the appraiser determines the final opinion of value. In markets with few recent sales, appraisers may expand the search radius or look back further in time.

What Happens When the Appraisal Is Low

A low appraisal means the appraised value is below the agreed purchase price. This creates a gap because the lender will only lend based on the appraised value or the purchase price, whichever is lower. For example, if you agreed to pay $425,000 but the home appraises at $400,000, the lender bases your loan on $400,000. With 10% down, you planned to borrow $382,500, but now the lender will only provide $360,000. You need to cover the $25,000 gap — plus your original down payment — or find another solution.

Your Options After a Low Appraisal

You have several options. Negotiate with the seller to reduce the price to the appraised value — this is the most common resolution, especially when comparable data supports the lower value. Bring more cash to cover the gap between the appraised value and the purchase price. Meet in the middle — you pay some of the gap, the seller reduces the price to cover the rest. Challenge the appraisal through a Reconsideration of Value (ROV) — provide your agent's comparable sales that the appraiser may have missed. Order a second appraisal (FHA allows this under certain conditions). Or walk away if your contract includes an appraisal contingency, which allows you to exit without losing your earnest money.

How to Prepare for a Smooth Appraisal

If you are selling, make sure the home is clean and accessible. Provide the appraiser with a list of recent improvements, comparable sales you believe support the value, and any unique features. Fix minor issues that could flag problems — loose handrails, dripping faucets, chipped paint. Ensure all areas of the home are accessible, including the attic and crawl space. For buyers, attend the appraisal if allowed and ask your agent to meet the appraiser to point out features and provide comparable sales data. A well-informed appraiser is less likely to miss value-adding features.