An appraisal is an opinion of value built from comparable sales. Knowing how it is constructed tells you when it is worth challenging.
An appraisal is ordered by the lender, performed by an independent licensed appraiser, and paid for by you. Its job is narrow: to produce a supportable opinion of the property market value on a given date. The lender then lends against the lower of that value or the contract price.
Most residential appraisals are built by the sales comparison approach. The appraiser selects recent sales of similar properties nearby, then adjusts each one up or down for measurable differences: square footage, lot size, bedroom and bathroom count, garage, condition, view, and the date of sale. The adjusted comparables bracket a value, and the report explains the reasoning.
That method decides what an appraisal is bad at. It does not measure what the house is worth to you. It does not measure future appreciation. It is weak where genuinely comparable recent sales do not exist, which is why unusual properties and thin markets produce wider spreads between two competent appraisers.
An appraisal is also not a home inspection. The appraiser notes condition as it bears on value and, on government programs, checks minimum property requirements. Nobody is testing your furnace. Keep the inspection.
When a value comes in below the contract price, the gap is real and it is yours to solve: renegotiate, pay the difference in cash, or use an appraisal contingency to exit. A reconsideration of value is worth requesting when you can point to a specific recent sale the report omitted, or to a factual error such as a wrong square footage. Supply the evidence, not the disappointment.
Illustrative sample figures for a template demonstration. Not a rate quote, not an offer to lend, and not live market data.
