Understanding Home Appraisals: What You Need to Know
Home appraisals can be one of the most confusing and stressful parts of buying or selling a home. But when you understand how they work, they become just another step in the process—not a hurdle. Let’s break down what appraisers look for, what to do if you get a low appraisal, and how this all affects your transaction. I’ll even share a couple of real-life stories to bring it all to life.
What Appraisers Look For
An appraiser’s job is to figure out the fair market value of a home. They’re not here to admire your interior design or criticize your furniture choices—they’re here to evaluate the key factors that influence value.
What They Focus On:
- Location: A home in a great neighborhood with amenities like parks, schools, or shopping will likely appraise higher.
- Size and Layout: The total square footage, number of bedrooms, bathrooms, and overall functionality.
- Condition: This includes major systems (roof, HVAC, plumbing) and overall maintenance.
- Upgrades: Renovated kitchens, new flooring, and energy-efficient features add value, but they need to align with what’s typical for the area.
- Market Conditions: Appraisers rely heavily on comparable home sales in the area (aka “comps”) to determine your home’s value.
Example: A seller in Queen Creek recently asked me why their $50,000 kitchen renovation didn’t increase their appraisal by the same amount. The reality is that upgrades add value only up to what the local market supports. An over-improved home compared to nearby properties might not get the return you expect.
How to Challenge a Low Appraisal
A low appraisal can feel like the ultimate deal-breaker, but it doesn’t have to be. You have options.
Steps to Take:
- Get a Copy of the Report: Check for inaccuracies, like incorrect square footage or outdated comps.
- Gather Evidence: Find better comps, document your upgrades, and compile receipts or permits.
- Request a Reconsideration: Work with your agent to present your case to the lender.
Example: I recently had a buyer in Chandler who was under contract for $500,000, but the appraisal came back at $475,000. After reviewing the appraisal, we found the appraiser missed a recent sale just down the street that supported the higher price. We submitted a reconsideration with the new comp, and the appraised value was adjusted to $490,000—close enough to get the deal done.
Other Options:
- Renegotiate the price with the seller.
- Cover the difference in cash.
- Request a second appraisal (though it’s not always guaranteed to change).
How Appraisals Affect Your Sale or Purchase
For Sellers:
A low appraisal can force you to adjust your price or risk losing the buyer. On the flip side, a high appraisal strengthens your position and validates your asking price.
Example: I had a seller in Gilbert whose home appraised $10,000 higher than the list price. The buyer was thrilled and moved forward without hesitation—no negotiation necessary.
For Buyers:
If the appraisal comes in lower than the offer price, the lender won’t cover the gap. You’ll need to either renegotiate or pay the difference out of pocket.
Example: A buyer in Chandler I worked with loved a home listed at $385,000, but the appraisal came back at $370,000. We negotiated with the seller, and they agreed to lower the price to match the appraisal.
For Refinancing:
The appraisal determines how much equity you can borrow against. A low appraisal might limit your refinancing options, so it’s essential to understand your home’s current value before starting the process.
Tips for a Successful Appraisal
- For Sellers:
- Make small repairs (e.g., fix leaky faucets, touch up paint).
- Provide a list of upgrades for the appraiser.
- Declutter and tidy up—while it’s not the main focus, presentation matters.
- For Buyers:
- Know the market value of the home and ensure your offer aligns with the comps.
- Be ready to adjust if the appraisal comes in low—your agent will help you strategize.
Final Thoughts
Home appraisals can feel overwhelming, but they’re just part of the process. Whether you’re buying, selling, or refinancing, understanding what to expect and how to handle challenges makes all the difference.
Have questions about your home or the appraisal process? I’m here to help. Let’s chat!
- Jessica Vukobratovich | 480-678-9397 | jessie@jessievuk.com
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