Module 9 · Lesson 5
Understanding the Appraisal
Explains what a mortgage appraisal is, who orders it, and how the appraiser arrives at a value estimate.
6 min read
What you'll learn
- What an appraisal is and why lenders require it
- Who orders and performs the appraisal
- What steps the appraiser typically follows
- What the appraisal report contains
An appraisal is an independent, professional opinion of a home's value, performed by a licensed appraiser and ordered by the mortgage lender as part of the loan approval process.
Why Lenders Require an Appraisal
Because the home serves as collateral for the mortgage, meaning the lender could take possession of it if the loan is not repaid, the lender wants assurance that the property is actually worth roughly what is being borrowed against it. The appraisal provides that independent check, separate from the buyer's and seller's agreed-upon price.
Who Orders and Pays for It
The lender orders the appraisal, typically through a neutral, lender-approved appraisal management system designed to keep the appraiser independent from the buyer, seller, and agents involved in the transaction. Even though the lender orders it, the buyer typically pays the appraisal fee as part of their closing costs.
What Happens During an Appraisal
The appraiser generally visits the property to assess its condition, size, layout, and notable features, takes photos, and records measurements. They then research recent comparable sales of similar nearby homes and adjust for differences, similar to how an agent evaluates comps, but the appraiser applies their own independent professional judgment and follows specific industry standards.
What the Appraisal Report Includes
The appraisal report typically includes a description of the property, photos, the comparable sales used, any adjustments made, and the appraiser's final estimated value. Lenders review this report as part of underwriting.
| Report component | What it shows |
|---|---|
| Property description | Size, condition, features observed |
| Comparable sales | Similar recent sales used as reference |
| Adjustments | Differences accounted for between comps and subject home |
| Final value opinion | The appraiser's concluded estimate of market value |
Timing in the Process
The appraisal is usually ordered once the buyer's loan application and initial underwriting steps are underway, and it often takes some time to schedule the visit and complete the report. This is one reason the overall closing timeline includes buffer time for the appraisal alongside inspection and underwriting.
Understanding what an appraisal is and how it is conducted helps buyers see why this step matters for their financing, and sets realistic expectations for what happens if the appraised value differs from the agreed purchase price.
Key takeaways
- An appraisal is an independent, professional estimate of a home's value, ordered by the lender.
- The appraisal protects the lender by confirming the home supports the loan amount.
- Appraisers combine a property visit with comparable sales research to reach their estimate.
- Buyers typically pay for the appraisal even though the lender orders it.
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Educational content only — not financial, legal, or tax advice. Verify details with a licensed professional for your situation.