What is a Home Appraisal And Why Do They Matter When Buying a Home?

Before buying a home with financing, there’s one important step lenders use to make sure the price you paid isn’t excessively above the property’s fair market value: the home appraisal.

Whether you’re buying a single-family home in Austin, a two-acre property outside Dallas–Fort Worth, or a condo in Los Angeles, your lender needs to verify one thing before releasing funds: that the home is worth what you’re paying. If the numbers don’t line up, the loan needs to be adjusted and potentially require you to put in a bigger down payment so the lender’s collateral  (your home) is properly protected.

This guide explains what a home appraisal is, how it works, how to get a home appraisal, how much a home appraisal costs, how long a mortgage appraisal takes, and what your options are if the appraised value comes in low. We’ll also break down appraisal waivers versus appraisal contingencies—two concepts buyers often confuse—and explain why working with a mortgage broker gives you more flexibility when issues come up.

What Is a Home Appraisal?

This section answers common questions like what is a home appraisal, what is an appraisal on a house, and what does an appraiser look for when appraising a house.

A home appraisal is an independent, third-party estimate of a property’s fair market value conducted by a state-licensed appraiser. Most mortgage lenders require an appraisal before approving a loan to confirm that the home reasonably supports the loan amount being requested.

At its core, the appraisal answers a simple question: if this home had to be sold today in the open market, would it likely sell for close to the agreed-upon price?

That can sound a little redundant considering the home probably was sold on the open market. But even open-market sales don’t always reflect rational pricing. In competitive situations—especially bidding wars—homes can trade well above what recent comparable sales would support. The lender’s job is to make sure the value is grounded in market evidence, not emotion.

This became especially important during the pandemic, when it was common to see homes sell for twenty to fifty percent over asking. Appraisals exist to put a reasonableness check on those situations, ensuring the loan is backed by supportable market value rather than peak demand or buyer urgency.

If you’re getting a mortgage whether it’s a purchase or a refinance you should assume an appraisal will be part of the process unless your lender grants a waiver or it's a streamline refinance like a VA IRRRL. Even then, the lender is still likely to validate value using alternative data sources.

Why Do Lenders Require an Appraisal?

Appraisals exist to protect the lender.

If a borrower defaults, the lender wants confidence that the home can be sold for at least the outstanding loan balance. That’s why the loan amount is always based on the lower of the purchase price or the appraised value, not whichever number is higher.

Buyers benefit too. An appraisal can confirm you’re not dramatically overpaying, especially in competitive or unfamiliar markets.

That said, appraisals are not perfect. They are opinions supported by data, not guarantees of resale value. Two competent appraisers can look at the same property and land on slightly different numbers. That’s normal.

Here’s a practical example. Imagine a home listed at $800,000 that ultimately sells for $900,000 after a competitive bidding war. The appraisal comes back at $850,000. In this case, the appraiser did support an above-asking offer—just not as high as the final contract price.

If the buyer planned to put 20% down based on the $900,000 purchase price, that would have been $180,000 down. But because the lender bases the loan on the lower appraised value, the math changes. The deal can still close, but the structure adjusts. This is exactly how appraisals protect the lender’s collateral while still allowing buyers flexibility when values don’t line up perfectly.

In most situations like this, buyers usually have three realistic choices:

Choice 1: Increase the down payment to cover the gap
The buyer brings roughly $220,000 to closing—$170,000 to maintain a twenty percent loan-to-value based on the $850,000 appraisal, plus the $50,000 difference between the appraised value and the purchase price.

Choice 2: Put down the originally planned $180,000 and accept a higher LTV
Instead of forcing twenty percent down, the buyer proceeds with a higher loan-to-value ratio. That typically means paying mortgage insurance, but only until the loan is paid down to around a seventy-nine percent LTV.

Choice 3: Renegotiate with the seller
The buyer asks the seller to reduce the price to better align with the appraisal. This can work in slower markets, but in a true bidding war—especially if your offer wasn’t dramatically higher than the others—it’s often the least likely outcome.

Choice 4: Dispute the appraisal
The buyer requests a Reconsideration of Value (ROV) by submitting better comparable sales or correcting factual errors in the report. If the dispute doesn’t increase the appraised value enough to fully close the gap, the buyer typically still ends up pursuing one of the other options—bringing additional cash, accepting a higher LTV, or renegotiating price if possible.

How Is a Home’s Appraised Value Determined?

Most residential appraisals rely primarily on the sales comparison approach, supported by secondary methods when needed.

Sales Comparison Approach

This is the most common method for single-family homes and condos. The appraiser compares your property to recently sold homes nearby with similar size, layout, condition, and location. Adjustments are made for differences like square footage, lot size, upgrades, or amenities.

Cost Approach

Used more often for new construction or unique properties. The appraiser estimates the cost to rebuild the home today, subtracts depreciation, and adds land value.

Income Approach

Primarily used for investment properties. Value is based on rental income potential rather than owner-occupant demand.

In addition to comps, appraisers evaluate:

• Square footage and functional layout

• Condition of major systems (roof, HVAC, plumbing, electrical)

• Location and neighborhood trends

• Lot characteristics and zoning

• Recent renovations and upgrades

What appraisers don’t do well is give dollar-for-dollar credit for custom or high-end finishes that aren’t common in the neighborhood. Imported stone, designer fixtures, or elaborate landscaping may matter to you, but if buyers in that area aren’t consistently paying more for those features, the appraisal won’t either.

Examples of How Appraisals Differ by Property Type

Single-Family Home in Central Austin. A three-bedroom home in central Austin is typically straightforward to appraise because there’s strong sales data. When multiple similar homes have sold recently, all within a mile of each other, appraisers have solid benchmarks. Problems usually arise when buyers stretch above recent comps or when renovations don’t align with neighborhood norms.

Two-Acre Property Outside DFW. Acreage can be complicated. Comparable sales are fewer, land value is harder to isolate, and improvements like barns or fencing may or may not add measurable value. Rural properties often take longer to appraise and cost more due to complexity.

When an appraiser has to go ten or fifteen miles out to find a truly comparable property, there’s almost always room for disagreement. Distance, zoning differences, land usability, and market dynamics can change meaningfully over that span, which makes acreage appraisals far more likely to result in disputes over value.

Condo in Los Angeles are appraised differently than houses. In addition to the unit itself, the appraiser evaluates the overall health of the HOA, owner-occupancy ratios, litigation, and deferred maintenance. Even if your unit is pristine, issues at the association level can affect value—or loan eligibility.

How Much Does a Home Appraisal Cost?

This is often searched as how much does a home appraisal cost or how much is a house appraisal, and the answer depends on property type, loan type, and location.

Appraisal costs vary by location, property type, and loan program, but most buyers should expect $600 to $1,000 for a standard single-family home, with the national average around $700.

Costs can be higher when:

• The property is large or complex

• The home is rural or has acreage

• The loan is jumbo

• The appraisal requires additional documentation (VA, FHA)

High-value homes, especially those over $2 million, can run $1,200 to $1,700 or more, and some jumbo lenders require two appraisals.

How Long Does an Appraisal Take?

Buyers frequently ask how long does a home appraisal take or how long does an appraisal take for a mortgage—the timelines below reflect typical national averages.

From order to final report, most appraisals take one to three weeks but the average is around 10 days.

• Scheduling: Typically within a few days, longer in rural areas

• On-site visit: Thirty minutes to several hours depending on complexity

• Report delivery: Five to ten business days after inspection

Unique homes, acreage properties, and high-value condos often take longer. You can typically pay a premium to expedite the service. This is why contract timelines matter, especially in competitive markets.

Appraisal Waivers vs. Appraisal Contingencies (Not the Same Thing)

Many buyers searching can I get an appraisal on my home or how do you get a home appraisal run into confusion at this stage.

This is where many buyers get tripped up.

Appraisal Waiver (Lender Decision) An appraisal waiver means the lender agrees to approve the loan without a traditional in-person appraisal. The value is validated using automated models, recent sales data, and prior valuations.

Waivers are more common when:

• You’re putting at least 20% down

• The property has strong, recent comps

• The loan is conventional conforming

In limited cases, borrowers with lower down payments may qualify, but it depends on risk profile and market data.

Appraisal Contingency (Contract Decision) This is a clause in your purchase contract. If you waive it, you’re agreeing to move forward even if the appraisal comes in low. That means bringing cash to cover the gap or losing leverage to renegotiate.

An appraisal waiver does not mean you’ve waived your appraisal contingency—and vice versa. Always confirm which one you’re dealing with.

What Happens After the Appraisal?

Once the appraisal is complete, there are three typical outcomes. Each one affects the loan differently, but none of them automatically kill a deal.

Appraisal Matches or Exceeds the Purchase Price

This is the cleanest outcome. The loan moves forward as structured, and there’s nothing additional you need to do from a financing standpoint.

Appraisal Comes in Low

This is the most common source of friction. The lender will not finance more than the appraised value, which means the loan needs to be adjusted. Depending on your structure, you may need to renegotiate the purchase price, increase your down payment, or challenge the appraisal with better comparable sales.

When the appraised value is below the purchase price, the lender bases the loan on the lower number. What happens next depends on your structure and your contract.

There are four realistic paths (as noted in the example above):

Renegotiate the Price
If your appraisal contingency is intact, you can ask the seller to lower the price. This is common—especially when comps support the appraisal.

Bring Cash
You can cover the difference out of pocket. If you were already putting more than the minimum down, this may not require additional cash—just a reallocation.

Challenge the Appraisal
Your lender can submit a Reconsideration of Value (ROV) if there are factual errors or better comps. Success rates are modest, but it’s worth pursuing when justified.

Order a Second Appraisal
This is where mortgage brokers really matter. In many cases, a broker can move your loan file to a different lender and order a new appraisal if the first one appears unsupported or overly conservative. Most big banks and direct lenders don’t allow this once an appraisal is tied to their internal system.

At LendFriend, we’ve had to do this several times in 2024 for a variety of reasons—poor comp selection, excessive distance between comparables, or appraisers unfamiliar with unique property types like acreage or condos with nuanced HOA structures. In those situations, the second appraisal has consistently come in higher because it relied on more appropriate comps and a more accurate read of the local market.

This isn’t about shopping for a number or gaming the system. It’s about making sure the valuation is reasonable, well-supported, and reflective of how buyers are actually transacting in that area. Having access to multiple lenders gives brokers the flexibility to fix appraisal problems instead of forcing buyers to overcorrect with unnecessary cash.

Loan Type Matters: Appraisal Rules by Based on Loan Program

Conventional Loans

Conventional appraisals are primarily focused on market value. The appraiser’s job is to determine what similar homes are actually selling for and whether the subject property reasonably fits within that range. Cosmetic issues typically don’t matter unless they impact safety or basic livability. This flexibility makes conventional loans the easiest to work with from an appraisal standpoint, especially for homes that are dated but functional.

VA Loans

VA appraisals must meet the Department of Veterans Affairs’ Minimum Property Requirements (MPRs). In addition to value, the appraiser evaluates habitability, safety, and structural soundness. Issues like missing handrails, roof problems, non-functioning utilities, or safety hazards can trigger required repairs before closing. VA appraisals are ordered through a centralized system, which can add time—particularly in rural areas.

FHA Loans

FHA appraisals are similar to VA appraisals in that they go beyond value alone. The focus is on basic livability and safety, including items like handrails, working utilities, and the absence of peeling or chipped paint in older homes due to lead-based paint concerns. FHA appraisals can require repairs before the loan is approved, which is important to factor into contract timelines.

Jumbo Loans

Jumbo loan appraisals typically involve more scrutiny because the loan amounts exceed conforming limits. Lenders often require tighter comparable sales, longer review times, and additional documentation. In some cases—especially for high-value or unique properties—two separate appraisals may be required. Turnaround times and costs are usually higher, and conservative valuations are more common due to increased lender risk.

Can You See the Appraisal?

Borrowers often ask who does home appraisals and whether they’re allowed to see the report once the appraisal on a house is completed.

Yes. Borrowers are legally entitled to a copy of the appraisal once it’s completed. Review it carefully for:

• Incorrect square footage

• Missing upgrades

• Bad or outdated comps

• Address or zoning errors

Errors happen more often than people realize. As a borrower, you’re always permitted to request a dispute through your lender and ask for a formal Reconsideration of Value (ROV) if there are factual mistakes or stronger comparable sales that weren’t considered.

Tips to Maximize Appraised Value (Refinance or Sale)

For homeowners refinancing or selling:

• Provide a clear list of upgrades with dates

• Fix obvious maintenance issues

• Improve curb appeal

• Clean and declutter

• Share relevant comps when appropriate

You can’t control the market—but you can control presentation and accuracy. Sellers should want to work with the appraiser whenever possible. A higher, well-supported appraised value reduces friction for the buyer, improves financing confidence, and makes everyone more motivated to get to the closing table.

Final Thoughts

A home appraisal isn’t meant to derail your transaction—it’s meant to keep it grounded. When values line up, appraisals are routine and forgettable. When they don’t, the appraisal becomes a negotiation tool, a structuring exercise, or a problem to solve.

The buyers and sellers who navigate appraisals most successfully are the ones who understand what appraisals can and cannot do, plan for some variability in value, and work with professionals who know how to respond when things don’t come in perfectly. Whether that means adjusting a down payment, challenging a valuation, or leveraging lender flexibility, there’s usually more than one path forward.

Handled correctly, an appraisal doesn’t stop a deal—it helps shape one that actually closes.

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