What Is a Home Appraisal—And Why Does It Matter?

Whether you're buying, selling, or refinancing a home, chances are a home appraisal will be part of the process. While it might seem like just another box to check, the appraisal plays a critical role in determining the value of a property—and can directly affect the outcome of a sale.

Let’s break down what a home appraisal is, how it works, and why it matters to both buyers and sellers.

What Is a Home Appraisal?

A home appraisal is an unbiased, professional opinion of a property’s market value, conducted by a licensed appraiser. In most real estate transactions involving a mortgage, the lender requires an appraisal to ensure the home is worth what the buyer has agreed to pay.

It’s essentially a financial safeguard—for both the buyer and the lender.

How Appraisers Determine Value

Appraisers look at a wide range of factors when assessing a home's value, including:

Recent comparable home sales (aka “comps”) in the area

Square footage and layout of the property

Condition of the home, including updates and repairs

Lot size and location

Features and amenities, such as garages, basements, or pools

They compile this data into a report that lenders use to determine whether the mortgage amount is appropriate for the home’s actual value.

Why It Matters for Buyers

If the appraisal comes in at or above the contract price—great news! Your financing can move forward.

But if the appraisal comes in below the agreed-upon price, it can complicate the transaction. In that case, the buyer may need to:

Cover the difference in cash

Renegotiate the sale price with the seller

Or, in some cases, walk away from the deal

This is why it's important for buyers to include appraisal contingencies in their contracts and work closely with their agents on offer strategy.

Why It Matters for Sellers

For sellers, an appraisal helps confirm that your home is priced correctly. A low appraisal—especially if the buyer is financing—can stall or even derail a deal if expectations and market value don’t align.

To prepare, sellers can:

Ensure the home is clean and in good condition

Provide a list of recent upgrades or renovations

Highlight neighborhood improvements or relevant comps

Your real estate agent can help present your home in the best possible light for the appraiser.

Appraisal vs. Home Inspection—What’s the Difference?

While both are part of the home-buying process, they serve different purposes:

Appraisal: Focuses on market value

Inspection: Focuses on condition and safety issues

Both are valuable and provide insight into different aspects of the home.

Final Thoughts

Appraisals might not be the most glamorous part of a real estate deal, but they are one of the most important. Understanding how they work—and how they can impact your transaction—gives you a stronger position whether you’re buying, selling, or refinancing.

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