An appraisal is an independent, professional estimate of a property's fair market value conducted by a state-licensed or certified appraiser. Mortgage lenders require appraisals for virtually all purchase and refinance transactions to ensure the property is worth at least the amount being lent. The appraisal protects the lender — and by extension, the buyer — from overpaying for a property or borrowing more than the property is worth.
During the appraisal process, the appraiser visits the property and evaluates its condition, size, layout, location, age, and features. They note the number of bedrooms and bathrooms, the quality of finishes, any updates or renovations, and any issues that might affect value (such as needed repairs or non-conforming features). For condominiums, the appraiser also evaluates the overall condition of the complex, HOA finances, and the percentage of owner-occupied units.
The appraiser then identifies comparable sales (comps) — recently sold properties that are similar to the subject property in location, size, condition, and features. Typically, the appraiser selects 3 to 6 comps that sold within the past 6 months and are located within a reasonable distance (usually 1 mile for urban areas, further for rural properties). Adjustments are made for differences between the comps and the subject property to arrive at a final value opinion. If the subject property has an extra bedroom compared to a comp, the appraiser adds value; if it lacks a garage that the comp has, they subtract value.
If the appraisal comes in lower than the purchase price, the buyer faces several options: renegotiate the price with the seller, pay the difference out of pocket (increasing the down payment), challenge the appraisal by providing additional comps, or cancel the contract using an appraisal contingency. Low appraisals are one of the most common hurdles in real estate transactions, which is why understanding the appraisal process is important before making an offer.
Appraisal fees typically range from $400 to $700 for a standard residential property and are paid by the buyer. The fee appears on the closing disclosure as part of closing costs. At Beycome Title, while we do not order appraisals (that is the lender's responsibility), we coordinate closely with lenders to ensure appraisal timelines align with your closing schedule. Use Beycome's property price estimator to get a preliminary sense of your home's value before the formal appraisal.