Appraisal
Definition
An appraisal is an independent professional estimate of a property's market value, used by the lender to confirm the security behind your mortgage.
How it works
The appraiser inspects the property and compares it against recent sales of similar homes nearby, adjusting for size, condition, age, and location. The result is a supported opinion of value, not a negotiation.
Lenders lend against the lower of the appraised value and the purchase price. If a home under contract at $800,000 appraises at $760,000, the mortgage is sized on $760,000 and the buyer must cover the $40,000 gap in cash.
Residential appraisals typically cost $300 to $600 and are sometimes waived on strong insured files where an automated valuation is accepted. Commercial appraisals are far more involved and cost several thousand dollars.
Quick facts
- Lenders use the lower of appraised value and price.
- Residential cost is usually $300–$600.
- Can be waived on some insured purchases.
Put this into practice
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