Application Process
What is a home appraisal?
A home appraisal is an independent, licensed professional's estimate of a property's market value. Lenders require one before approving a mortgage to confirm the home is worth at least as much as the loan amount. It typically costs $300–$600.
The full picture
A home appraisal is a formal, third-party estimate of a property's fair market value performed by a state-licensed or certified appraiser. Your mortgage lender orders one — and you typically pay for it — to make sure the home is worth at least as much as the loan they're extending. If the appraised value comes in below the purchase price, you'll need to renegotiate, make up the difference in cash, or walk away. The CFPB explains the appraisal process as part of its homebuying guide.
How an appraisal works
The appraiser visits the home, inspects its condition, size, features, and location, and then compares it against recent sales of similar nearby properties (called "comparables" or "comps"). The result is a written appraisal report delivered to the lender, usually within 1–2 weeks of the visit. As the borrower, you have the right to receive a copy of the appraisal at least 3 business days before closing, under the Equal Credit Opportunity Act valuations rule.
- Ordered by the lender, paid for by you — typically $300–$600 for a single-family home.
- Must be conducted by a state-licensed or state-certified appraiser.
- Based on the sales comparison approach: recent, nearby, similar sold properties.
- You receive a copy at least 3 business days before closing — review it for errors.
- A low appraisal doesn't automatically kill the deal — you can negotiate, dispute, or cover the gap.
What happens if the appraisal comes in low?
A low appraisal — where the appraised value is below the agreed purchase price — creates a gap. Lenders will only finance up to the appraised value. Your options: (1) renegotiate the purchase price down to the appraised value, (2) pay the difference out of pocket, (3) request a reconsideration of value (ROV) from the lender if you believe the appraiser missed comparable sales, or (4) walk away if your contract includes an appraisal contingency. HUD's homebuying resources cover appraisal standards.
Appraisal vs. home inspection
These are frequently confused. An appraisal establishes value for the lender. A home inspection identifies physical defects (roof, foundation, HVAC, plumbing) for the buyer. They are conducted by different professionals, serve different purposes, and are both typically part of a home purchase — but neither substitutes for the other.
Key facts
- Under the Equal Credit Opportunity Act (Regulation B), lenders must provide applicants a free copy of home appraisals and other written valuations promptly, and at least 3 business days before closing. — CFPB — Reg B Valuations Rule
- Home appraisals are conducted by state-licensed or state-certified appraisers following the Uniform Standards of Professional Appraisal Practice (USPAP). — HUD
- If a home appraisal comes in below the purchase price, a borrower can request a reconsideration of value (ROV) and submit evidence of comparable sales the appraiser may have overlooked. — CFPB — Owning a Home
Key takeaways
- A home appraisal is required by your lender and confirms the home's market value supports the loan amount.
- You pay for it ($300–$600 typically) and are legally entitled to a copy at least 3 business days before closing.
- Low appraisal? Renegotiate the price, challenge it with an ROV, cover the gap in cash, or exit via appraisal contingency.
- Appraisal ≠ inspection: appraisal is for the lender (value); inspection is for you (condition).
- Appraisers use recent comparable sales in the area — the local market directly drives the outcome.
Published 2026-05-22 · Updated 2026-05-22 · https://clearvaluelending.com/answers/what-is-a-home-appraisal