Boost your real estate literacy by learning more about appraisals, an important area of real property valuation, and the real estate professionals responsible: appraisers.
Q: What is a real estate appraisal?
A: An appraisal is an independent, professional estimate of a property's fair market value. A licensed appraiser evaluates the property's condition and features, either through a physical visit or remotely using MLS data, public records, and photos and compares it to similar homes that have recently sold nearby. The result is a report that provides lenders with information and assures buyers they are paying a fair price.
Q: Why do lenders require an appraisal?
A: When a buyer takes out a mortgage, the home serves as the lender's collateral. The bank needs to confirm the property is worth at least as much as the loan, a ratio known as Loan-to-Value (LTV). If the appraisal comes in low, the LTV shifts, which can affect how much the lender will finance and whether the deal closes.
Q: Who orders and pays for the appraisal?
A: In most purchase transactions, the buyer's lender orders the appraisal — but the buyer pays the fee, typically between $400 and $700 in the New York area. The appraiser is selected independently by the lender (often through an Appraisal Management Company) to ensure there is no conflict of interest.
Q: How long does an appraisal take?
A: The physical inspection of the property usually takes between 30 minutes and a few hours, depending on the size and complexity of the home. After the visit, the appraiser typically delivers the completed report to the lender within 5 to 10 business days, though timelines can vary based on workload and market conditions.
Q: What does the appraiser look at during the inspection?
A: The appraiser evaluates the home's overall condition, size (square footage), number of bedrooms and bathrooms, age, updates or renovations, lot size, location, and any features that add or detract from value. An appraiser will also note the neighborhood and proximity to schools, transportation, and amenities. It's important to note that appraisers are not home inspectors, they observe and note the condition of the property, but do not test systems or identify defects in the way a licensed home inspector would. All appraisers are required to follow USPAP (Uniform Standards of Professional Appraisal Practice), the nationally recognized ethical and performance standards developed by the Appraisal Standards Board of The Appraisal Foundation. USPAP does not prescribe a specific method or form, it requires that the appraiser's process be credible, impartial, and well-supported.
Q: What are 'comps' and why do they matter?
A: Comps — short for comparable sales — are recently sold properties in the same area that are similar in size, style, and condition to the subject property. The appraiser uses comps to support their opinion of value. As an agent, you can help by providing the appraiser with a list of the best comps you are aware of, especially if the property has unique features that make finding good matches difficult.
Q: What happens if the appraisal comes in low?
A: A low appraisal does not automatically terminate a deal, but it does create a gap between the loan the bank will approve and the agreed purchase price. Common solutions include: the buyer pays the difference in cash, the seller lowers the price, both parties meet somewhere in the middle, or the buyer requests a formal reconsideration of value (ROV) if there are errors or overlooked comps in the report.
Q: Can an agent or seller challenge a low appraisal?
A: Yes — this is called a Reconsideration of Value (ROV). The agent or seller can submit a written request to the lender along with supporting data: better comps, corrections to factual errors in the report (wrong square footage, missing upgrades), or documentation of recent improvements. The lender then forwards this to the appraiser for review. Note that the appraiser is not required to change their value, but factual corrections often make a difference.
Q: Are there different types of appraisals?
A: Yes. The most common for home purchases is the full interior-and-exterior appraisal. Other types include: a drive-by or exterior-only appraisal, a desktop appraisal (done entirely from data and photos without a site visit), and hybrid appraisals where a third party inspects the home and the appraiser reviews the data remotely. Lenders have been using digital and desktop options more often since the COVID-19 pandemic, especially for lower-risk loans.
Q: How is the MLS connected to the appraisal process?
A: Appraisers rely heavily on MLS data — specifically closed sales — to find comparable properties. Accurate and complete MLS listings are critical. Agents should make sure that square footage, bedroom and bathroom counts, lot size, and key features are entered correctly in OneKey MLS. Inaccurate data can lead to poor comps and an appraisal that does not reflect the property's true value.
Q: Can the seller or listing agent meet the appraiser at the property?
A: Yes, and it is often encouraged. The listing agent can greet the appraiser, provide a fact sheet about the property, point out recent upgrades or repairs, and share a list of relevant comps. Appraisers are independent professionals and make their own judgments but giving them complete and accurate information helps them do their job well.
Q: How do rising or falling markets affect appraisals?
A: In a fast-moving market, closed sales (which can be 3 to 6 months old) may not fully reflect today's prices. Appraisers are trained to make time adjustments to account for market trends, but these adjustments can sometimes lag behind rapidly changing conditions. In a hot seller's market, it is not uncommon for appraisals to come in slightly below the contract price, especially in bidding-war situations.
Q: How can listing agents support the best possible appraisal outcome?
A: One of the most impactful things a listing agent can do is maintain high data standards in their MLS listings. This means ensuring square footage, bedroom and bathroom counts, lot size, and property features are entered accurately and that settlement data is reported in a timely manner. Appraisers rely on closed sale data from OneKey to find comparable properties, and incomplete or delayed reporting can result in poor comps that don't reflect a property's true value.
Q: Can a listing agent speak directly with the appraiser?
A: Yes, while appraisers are independent professionals, there is nothing preventing a listing agent from communicating with them.
Q: What appraisal-specific tools are available to appraisers in Matrix?
A: OneKey’s Matrix platform includes tools that appraisers can use directly in their work. The 1004MC is a standardized real estate appraisal form designed to help appraisers provide a more detailed and consistent analysis of local market trends. Appraisers can run this report directly in Matrix. Beyond that, Matrix allows for customized searches and reporting, single line displays, exporting listings, and letting appraisers refine comp searches by specific criteria to match the subject property as closely as possible.