What you need to understand about an appraisal

Posted by Caroline Hobbs on Saturday, August 18th, 2018 at 11:32am.

Prior to making an offer, your agent should have discussed with you the home values for the area and presented a comparable sales analysis (CMA) for you to review prior to deciding on the price you would like to offer. These reports are used by Realtors to evaluate market conditions, understand pricing trends, and pinpoint the value of the subject property. Once you are in contract, and appraiser will be contracted to perform an appraisal on the property. 

The California Association of Realtors defines an appraisal as: "An opinion of the market value of a home expressed by a real estate appraiser." 

Regardless of whether you have included an appraisal contingency, it is important to remember two things:

1. The appraisal is an OPINION of value

2. The bank will only lend based on the appraised value of the home

What happens if the home does not appraise at the purchase price?

If you have an appraisal contingency in your offer, you may be able to negotiate with the sellers as to the final purchase price. If you do not have an appraisal contingency, then the "gap" amount must be made up IN CASH, in addition to your down payment. EX: If you offer $800,000 for a home and the appraisal comes in at $790,000, then you would need to put down $10,000 + your planned down payment.

Is it possible to dispute the appraisal value if it does not come in at the price you expected?

Yes, you may, but in my experience it does not often change by much. If the appraiser made an error on the report, this may give you a little bit more leverage for having the price adjusted. Also, looking at the comparable sales used in the report, you may submit additional sales which you feel are comparable which may have been omitted.


If you have any additional questions about the appraisal, feel free to drop them in the comments section below, and I would be happy to help!


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