Do Home Appraisals Affect Selling Price?

Appraisals play an important role in the home selling process, by helping to set trusted parameters for the price of the home, and by extension, the mortgage loan amount for that home.


What is an appraisal?

An appraisal is an estimate of your property's fair market value, i.e., how much your property is worth. It also helps you know how much a lender will give you for a property.

You can obtain an appraisal from a licensed appraiser. When appraising a property, an appraiser will consider:

  • Location
  • Recent sales of comparable homes in the nearby area
  • The condition of the home's construction
  • Amenity availability and condition
  • Special feature availability and condition
  • Size of property
  • Major structural improvements or changes


Appraisals aren't home inspections. Inspections look instead at wear and tear, hazards, and damage to a property. If you're considering purchasing a property, a home inspection is still recommended/required, even if the home has been appraised.


How appraisals affect selling prices

A property's appraised price does not necessarily have to match its listing price. Of course, in the seller's best interests the appraised price should match the listing price, but if there is a significant difference then the seller might be well-advised to revisit the pricing of the house - usually by consulting with a trusted real estste agent.

This applies whether the appraisal is higher or lower than the listing price. But when the appraisal value is higher than the listed price of the home, that may provide the seller with distinct negotiating advantages and bargaining power.


How appraisals affect mortgage loan amounts

Appraisals affect how much lending companies will give you in mortgage loans. They act as an unbiased estimation of the property's fair market value and so keep lenders from giving you too much.

If an appraisal is lower than the purchase price of the home that you're interested in, then your lender will give you a loan that's based on the loan-to-value (LTV) ratio stated in your proposed contract with them. This LTV is representative of how much of the property the loan will cover.

If an appraisal is higher than the property's purchase price, then you're in luck. You're getting the property at cheaper than its market value. Your mortgage amount won't change because the selling price won't rise to match the appraisal.


Helping an appraisal as a seller

Appraisals can be helped by doing the following before the appraiser comes round:

  • Make a great first impression - this includes mostly cosmetic fixes such as painting, tidying, cleaning, etc. However, it could also include more serious fixes like railings on decks, handrails, plumbing, roofs, foundations, leaks, cracks, and so on.
  • Fix what needs to be fixed - if you know that there's something seriously wrong with the property, fix it before the appraiser comes around.
  • Stockpile proof - whatever new fixtures, appliances, renovations, repairs, or improvements you add to the property, ensure that you take plenty of photos and receipts to show the appraiser.


Handling an appraisal as a buyer

It can happen that you've agreed to pay more for a home that ended up having a low appraisal. In this case, you can:

  • Renegotiate the sales price - talk to the seller(s) and see if they'd be willing to match or at least hover near the appraisal.
  • Request a review - if you can compile enough evidence to support a request for a review, then you can ask the appraiser to try again.
  • Don't give up hope - if you can't lower the price by your own efforts, then just keep an eye on the property. The sellers may end up lowering the price themselves if they don't manage to sell at their asking price.


Appraisals are a key part of purchasing a property

Understanding appraisals helps you better navigate the property purchasing process. Leveraging this knowledge will make your property purchase or sale smooth and seamless.




We hope this article was of value to you. For more great tips, bookmark our site and for all your mortgage needs, visit the A Team at TMFFMS.


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