home appraisal

What is an appraisal? What does an appraiser look for when deciding a home’s worth? What if the appraised value is lower than expected? Or higher? Read on to find out.

The Basics

An appraisal is a professional, unbiased opinion of a property’s value. Before lenders provide a mortgage, they will insist on an appraisal. Once it is complete, the bank will determine the loan’s size to ensure the mortgage isn’t more than the home’s value. An appraisal must either exceed or match the loan amount. Generally, banks will not lend more money than the home is worth and will only approve a loan for a home that appraises for the full sale price or higher. Essentially, the house serves as collateral. If a homeowner can’t pay the mortgage, the bank may foreclose.


An appraiser is certified or licensed, impartial, and knows the area well. This person appraises the subject property based on the condition of the home, including factors both outside and inside, as well as comparable sales in the neighborhood.

Appraisals compare the number of rooms, the square footage, and the dimensions of the lot to other properties of similar size in the area. More land will often result in a higher appraisal because it allows room to expand. More bathrooms and bedrooms than other homes in the neighborhood will also increase the valuation.

Interior and Exterior Conditions

Other than its overall size, an appraiser will consider the building materials used. Granite counter tops, wood flooring, updated electrical wiring and plumbing, brick siding, and additions such as decks, patios, garages, pools, and fences can add to a home’s value.

On the other hand, damage to the foundation, driveway, windows, roof, signs of mold, or any other defects will decrease what a home is worth.

Appraisal Reports

A report should include the following: a drawing of the exterior; a map of the street showing the property and the comparables; photographs of the home’s front, back, and street view; photos of other comparables; an explanation of how the square footage was calculated; public tax records; public land records; and market sales data. If any of these documents are missing, insist on another appraisal.

Missing data can affect the home’s value. Although it’s not common, appraisers can make mistakes or have incorrect information.

High or Low Appraisals

If the appraisal comes in higher than the sales price, it benefits the buyer. You’ll have more equity in the property immediately. The mortgage will be offered, and the transaction can proceed as planned. 

If the appraisal is lower than expected, you have several options. If your offer is contingent on the appraisal, you can rescind it and your earnest money will be returned. If you want to buy the house anyway, consider having another appraisal done or renegotiate a lower offer. (A home inspection might also help negotiate a lower price.) Finally, you can always ask the seller to finance the difference or pay the gap amount on your own.

The process of appraising a property is an important step in getting a loan and purchasing a home. Knowing and understanding your options as a buyer and how this process works will make this a much easier and more enjoyable experience.

Another way to make the home buying process a more enjoyable experience is to go through N.J. Lux Real Estate. Contact us today if you are in the market to buy a home in the New Jersey area.

On a side note, never confuse an appraisal with an inspection. Watch for future blogs for information on this topic.

Joshua M. Baris Bergen County Realtor

Welcome to NJLux your premiere resource for New Jersey Luxury Real Estate focusing on NJ Luxury Listings and Bergen County Luxury Homes For Sale. Joshua Baris Founder and Owner of NJLux utilizes cutting edge technologies, strategic on-line marketing techniques, key word optimization and social media platforms to Sell New Jersey Luxury Properties.

These marketing techniques continuously rank Joshua in the Top 1% of Licensed New Jersey Real Estate Agents and he was recently honored in THE THOUSAND – Real Trends & The Wall Street Journal as one of the Top 1000 Real Estate Professionals in the United States.

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