Appraisal

An appraisal is when a licensed appraiser visits a home and delivers a professional opinion of what it's actually worth on the open market. Lenders require this before approving a mortgage because they want to make sure the property is worth at least as much as the loan they're issuing.

The appraiser is a neutral third party. They're not working for the buyer or seller. They look at the home's condition, size, features, and location, then compare it against recent sales of similar homes nearby.

Their conclusion is a dollar figure: the appraised value. That number can match the purchase price, come in higher, or (most stressfully for everyone involved) come in lower than what buyer and seller agreed to.

For buyers, the appraisal protects you from overpaying for a home. If the appraised value comes in below the purchase price, your lender will typically only finance a loan based on the lower number, which creates a gap that needs to be resolved.

For sellers, a low appraisal can derail a transaction or force renegotiation. A high appraisal confirms that the agreed price is supported by market data.

The appraisal is also required to close most mortgage transactions. Without it, the lender won't fund the loan.

A buyer and seller agree on a price of $380,000. The buyer's lender orders an appraisal. The appraiser reviews the home and recent comparable sales in the area, then determines the home's market value is $375,000. There's now a $5,000 gap between the appraised value and the purchase price (an "appraisal gap") that the buyer and seller will need to negotiate.

"The appraisal tells me what the home is worth, full stop."

An appraisal is a professional opinion based on available data at a specific point in time, not an absolute truth about a home's value. Two appraisers can look at the same property and arrive at different numbers. Market conditions, the comp selection, and even the appraiser's experience can all influence the result.

Think of it as a well-informed estimate, not a certified fact.