What an Appraisal Actually Is
An appraisal is an independent, licensed professional's estimate of a property's market value as of a specific date. The lender orders it because they're not going to lend more than the home is worth, if you default, they need to be confident they can recoup the loan amount through a sale.
Appraisals are different from home inspections. An inspection evaluates the condition of the home, roof, plumbing, electrical, foundation, and is for your benefit as the buyer. An appraisal is a value opinion for the lender. Both matter, but they're separate processes with different people and different reports.
How the Appraiser Calculates Value
For most residential properties, appraisers use the sales comparison approach: they find 3-6 recently sold comparable properties ("comps") within roughly a mile of the subject property, adjust for differences in size, condition, lot, view, age, and features, and arrive at an opinion of value.
Good comps are recent (sold within 90-180 days), nearby, similar in size and style, and in similar condition. In active markets, finding comps is easy. In rural or unique properties, finding them is harder, and the appraiser may need to use comps from a wider area or with larger adjustments.
What the Appraiser Looks At During the Visit
The appraiser will typically spend 30-60 minutes at the property. They'll measure the exterior, take interior and exterior photos, note the number of bedrooms and bathrooms, evaluate condition (kitchen and bath updates, flooring, paint), and look for any safety issues that could affect value or financeability.
On FHA and VA loans specifically, the appraiser is also looking for property condition issues that could block the loan, chipping paint on pre-1978 homes (lead paint concern), exposed wiring, missing handrails, broken windows, water damage. These items may need to be repaired before the loan can close.
How Long Does an Appraisal Take?
From the time the lender orders the appraisal to the time the report is delivered, expect 5–14 business days. The on-site visit is one day; the report write-up takes another 3-10 days. In busy markets or for complex properties, it can take longer.
The appraiser submits their report to the lender, who reviews it and may push back on the appraiser's value if it seems inconsistent with the comps. You'll receive a copy of the appraisal, typically within 3 days of the lender receiving it, per federal regulation.
What Happens If the Appraisal Comes In Low
A low appraisal means the appraised value is below the contract price. In that case, you have four main options:
1. Renegotiate with the seller. Bring the appraisal to the seller and ask them to drop the price to the appraised value. Some sellers will, especially in slower markets.
2. Bring more cash to closing. Increase your down payment by the difference so the loan amount stays within the lender's loan-to-value cap. This works if you have the funds.
3. Challenge the appraisal. Submit a Reconsideration of Value with comps the appraiser may have missed. This rarely results in a significant change, but it's free to try.
4. Walk away. Most California purchase contracts include an appraisal contingency that lets you exit with your earnest money intact if the appraisal comes in low and you can't renegotiate.
Refinance Appraisals, and Appraisal Waivers
On a refinance, the appraisal compares your home's current value to the loan amount, determining the loan-to-value ratio. A higher appraised value lowers your LTV, which can mean better pricing and PMI removal.
Conventional refinances increasingly qualify for an appraisal waiver: Fannie Mae and Freddie Mac use their internal valuation models to skip the appraisal entirely. Savings of $500-$900 and a faster closing. Waivers are based on the property type, equity position, and the lender's automated underwriting system findings.