Definition
An appraisal is a professional valuation by a licensed appraiser. They inspect the property, analyze comparable sales, apply three valuation methods, and conclude to a value. Lenders require appraisals to ensure loan amounts are reasonable.
Where you’ll meet it
What happens after they say yes?
See it in Buying my first home · Step 5About this term
Appraisals are required by lenders to ensure the loan amount doesn't exceed property value. Appraisers use three approaches: sales comparison, cost approach, and income approach.
Pro Tip
Appraisals typically take 5-7 days. Low appraisals derail deals—prepare by reviewing comparables and being ready to counter with additional evidence if the appraisal comes in low.
Example
The lender ordered an appraisal showing the $400,000 purchase price was reasonable based on three comparable sales ranging from $395,000-$405,000.