What Happens After an Appraisal Is Ordered?

A home appraisal is an independent, professional assessment of a property’s market value, a step required by lenders when a real estate transaction involves financing. This evaluation provides an unbiased opinion to ensure the property’s value adequately supports the loan amount requested. Lenders rely on appraisals to mitigate risk, confirming the asset securing the loan is worth at least the principal amount borrowed.

The Appraisal Process

Once an appraisal is ordered, a state-licensed appraiser is assigned to the property. The appraiser contacts the property owner or listing agent to schedule a physical inspection. This involves coordinating access to the property within a few days of the order being placed.

During the physical inspection, the appraiser reviews the property’s interior and exterior. This includes noting the property’s condition, features, and any improvements. The appraiser measures the property to confirm square footage and assesses structural integrity, safety issues, and the number of rooms. They also document amenities like swimming pools or renovated kitchens.

Following the on-site inspection, the appraiser begins data collection and analysis away from the property. This involves research into comparable sales in the local market. Appraisers analyze recent sales data from sources like the Multiple Listing Service (MLS) and public records to identify properties with similar characteristics, such as size, age, condition, and location. The most common method for residential properties is the Sales Comparison Approach, where the appraiser adjusts prices of comparable properties to account for differences with the subject property.

The appraiser considers factors during this analysis, including market conditions and neighborhood influences. These adjustments reflect how features of comparable properties compare to the subject property. The appraiser compiles findings and their opinion of value into a comprehensive report. The entire process, from scheduling to report completion, can take anywhere from a few days to a few weeks, depending on the property’s complexity and the appraiser’s workload.

Appraisal Review and Delivery

After the appraiser completes and submits the report, it goes through an internal review process, often handled by the lender or an Appraisal Management Company (AMC). This review ensures the appraisal report complies with relevant regulations, industry standards, and the specific requirements of the lender. It involves checking for accuracy, completeness, and consistency in the appraiser’s analysis and conclusions.

Quality control checks are performed to verify that the report adheres to established guidelines. This might involve a “desk review,” where another appraiser or a quality control team reviews the report for technical methodology and compliance without a new site visit. Some cases might even involve a “field review,” where a different appraiser conducts an exterior-only inspection to verify the original report’s findings.

Once the appraisal report has passed internal review and quality checks, it is delivered. The lender receives the report first. Borrowers are entitled to receive a copy of the final, reviewed appraisal report, usually delivered through a secure online portal or email, before the loan closes. This process can add several days to a week to the overall timeline after the appraiser’s submission.

Interpreting the Appraisal Report

Once the appraisal report is received, understanding its structure and content is important. A standard appraisal report includes sections that detail the property’s valuation. These often include an Executive Summary, a Property Description, a Site Description, and a Neighborhood Analysis.

The report also features a Comparable Sales Analysis, detailing properties used for comparison and any appraiser adjustments. These adjustments explain how differences in features, condition, or location between the subject property and comparable sales influenced the final value. The Reconciliation of Value section summarizes how the appraiser arrived at their final valuation.

Photographs of the interior and exterior, a floor plan or sketch, and a list of limiting conditions and certifications are also included. The report will state the final appraised value, which represents the property’s market value as of a specific date. This “effective date” indicates the date the property’s value was assessed.

Navigating Appraisal Value Discrepancies

If the appraised value is lower than anticipated, particularly if it falls below the agreed-upon purchase price or desired loan amount, several actions can be taken. The first step involves reviewing the appraisal report for any factual errors, inconsistencies, or overlooked comparable properties. Checking details like square footage, room counts, or major renovations can uncover discrepancies that might impact the valuation.

A request for a Reconsideration of Value (ROV) can be initiated through the lender. This process allows new information or corrections to be submitted to the appraiser for review. Evidence supporting an ROV might include more relevant comparable sales not utilized in the original report, documentation of recent property upgrades not fully accounted for, or factual errors found within the report. An ROV provides additional or corrected data for the appraiser’s consideration, rather than arguing their opinion.

When a low appraisal impacts a purchase agreement, the buyer and seller may need to negotiate. Options include renegotiating the purchase price to align with the appraised value, the buyer increasing their down payment to cover the difference, or the seller offering concessions. If an appraisal comes in low for a refinance or home equity line of credit (HELOC), it can affect the loan terms. A lower appraised value might lead to a higher loan-to-value (LTV) ratio, potentially requiring a smaller loan amount, a higher interest rate, or even the payment of private mortgage insurance (PMI). In some situations where the discrepancy cannot be resolved, exploring other lenders or financing solutions might become necessary.