Why a buyer needs an appraisal
When you borrow to buy a home, the Consumer Financial Protection Bureau says the lender may need an appraisal and may require you to pay for it. The appraisal gives the lender an independent opinion of value, and it gives you a check on the price. It is not a promise about the future value of the home.
What the report shows a buyer
The report names the property, the date and the intended users, then shows the comparable sales and the adjustments. A buyer who reads those pages learns what recent buyers paid for similar homes, which is strong evidence of what the market supports.
If the appraisal is below the price
The Consumer Financial Protection Bureau says that if an appraisal comes in significantly lower than the offered price, a buyer may want to consider renegotiating the price or reviewing the appraiser's work carefully to understand how the value was reached. A buyer can also obtain an independent appraisal, which may cost extra. The steps:
Read the report and the comparable sales.
Check the description of the home for errors.
Ask the lender how to raise a factual error.
Talk with your agent and, if needed, an attorney about the contract.
What the appraisal does not tell you
An appraisal is not a home inspection of the roof, plumbing or electrical systems, but it can note visible condition issues. The Consumer Financial Protection Bureau says an appraisal could identify major repairs, and that a loan program can require them before closing. The page on appraisal versus home inspection explains the difference.
Getting your copy
For a typical first-mortgage loan, the lender must generally give you a copy of its appraisal promptly, and no later than three business days before closing or account opening, unless you waive the timing as Regulation B allows. You cannot be charged a fee for the copy.
For the lender's side, read how lenders use appraisals, and for the process read how a home appraisal works.
Frequently asked questions
Can I order my own appraisal as a buyer?
Yes, you may obtain an independent appraisal, and it may cost extra. Tell the lender if you do.
Who pays for the lender's appraisal?
The lender may require you to pay for it, according to the Consumer Financial Protection Bureau.
Does a low appraisal cancel the sale?
That depends on the contract and the loan. Ask your agent or attorney.
Do I see the comparable sales?
Yes, they are part of the report you are entitled to receive.