What an appraisal does, how value is developed, and what happens when value or condition creates an issue.
Purpose
A mortgage appraisal helps the lender evaluate collateral value and certain property characteristics. The appraiser develops an independent opinion using accepted methods and market evidence.
Comparable sales
Comparable sales are adjusted for differences such as location, size, condition, quality, site, view, age, and amenities. The closest property is not automatically the best comparable.
Condition
Some loan programs have property-condition requirements. Health, safety, structural, or marketability concerns can affect approval or require repairs.
Low appraisal
If value is below the contract price, options may include renegotiation, increased cash, a structured reconsideration request, a different loan strategy, or contract remedies.
Appraisal versus inspection
An appraisal is not a substitute for a buyer’s inspection. The goals and scope are different.
Questions to ask before acting
- What assumptions could materially change the result?
- How much cash will remain after closing?
- What happens if taxes, insurance, repairs, or income change?
- Which terms should be confirmed in writing?
Bottom line
Use this guide as a framework for better questions and more complete comparisons. Actual eligibility, pricing, legal rights, and transaction requirements depend on the borrower, property, lender, program, contract, and location.