Appraisal

A mortgage appraisal is a professional estimate of a property's fair market value conducted by a licensed or certified appraiser. The lender orders the appraisal (at the buyer's expense) to verify the home is worth at least as much as the purchase price — or the loan amount. If the appraisal comes in lower than the purchase price, the lender will only finance a percentage of the appraised value, not the contract price, which can leave a gap the buyer must cover. The appraiser's report follows the Uniform Residential Appraisal Report (URAR) format for standard single-family homes. The CFPB appraisal guide explains your rights as a borrower.

Appraisers primarily use the sales comparison approach: selecting 3–5 comparable sold properties ("comps") within the same neighborhood, similar size, condition, and age, and adjusting for differences (additional bedroom, larger lot, pool, updated kitchen, etc.) to estimate the subject property's value. The cost approach is used for newer construction: land value + depreciated cost to rebuild the structure. The income approach applies to rental properties: estimating value based on capitalized net operating income. For standard home purchases, the sales comparison approach carries the most weight. The appraiser must meet USPAP (Uniform Standards of Professional Appraisal Practice) standards. See Appraisal Institute resources for technical detail.

A low appraisal creates a gap between the contract price and what the lender will finance. Example: $400,000 purchase price, 10% down, 90% LTV. If appraised at $380,000, the lender will lend 90% × $380,000 = $342,000 — not $360,000. The buyer needs an extra $18,000 to close. Options: (1) Negotiate the purchase price down to the appraised value — the seller may agree if the market is soft; (2) Make up the difference out of pocket (appraisal gap coverage); (3) Challenge the appraisal with a formal rebuttal supported by stronger comps; (4) Order a second appraisal (note: not all lenders allow this). Including an appraisal contingency in your offer lets you exit the contract if the appraisal comes in low without forfeiting your earnest money. The NAR Confidence Index tracks how often appraisal issues delay or kill transactions.

A full (interior) appraisal: the appraiser physically inspects the property — interior and exterior — notes condition, updates, deficiencies, and takes measurements. This is standard for most purchase mortgages. A drive-by (exterior-only) appraisal: the appraiser evaluates the exterior only and relies on MLS data, tax records, and other data sources for the interior — less thorough but faster and cheaper. A desktop appraisal: no physical inspection; uses automated valuation models (AVMs), public data, and third-party data. Fannie Mae's Day 1 Certainty program allows desktop or hybrid appraisals for some low-risk refinances. For purchase loans above ~$400,000 or higher-LTV loans, full interior appraisals are standard. Rules from FDIC appraisal regulations (Regulation Y / Title XI).

A standard residential appraisal takes 1–2 hours for the physical inspection, plus 2–7 business days for the appraiser to complete the report. In high-volume markets or with complex properties, turnaround can extend to 2 weeks. Cost varies by property type, location, and complexity: single-family home: $300–$600 in most markets; condo: $250–$500; multi-unit (2–4): $500–$900; jumbo or luxury: $600–$1,500+; rural or complex: $500–$1,200+. The fee is typically paid by the buyer at the time of ordering (before closing). Under RESPA, you are entitled to receive a copy of the appraisal at least 3 business days before closing. The appraiser is selected by and works for the lender — but the report is yours to keep. CFPB appraisal copy rights.

No — for mortgage purposes, the lender selects the appraiser (or uses an Appraisal Management Company, or AMC) to ensure independence. This requirement stems from the Home Valuation Code of Conduct (HVCC) and subsequent Dodd-Frank provisions designed to prevent lender pressure on appraisers. You cannot select, contact, or influence the appraiser. You can: provide the appraiser with a list of comparable sales you believe support a higher value (submit to your loan officer, not the appraiser directly); request a formal reconsideration of value (ROV) if you believe the appraisal contains errors; submit a rebuttal with additional comps through your lender. If an ROV doesn't resolve a clear error, a second appraisal may be ordered — the lender decides, not the buyer. FHFA appraisal independence standards.