An appraisal is not always an accurate guide to
the market value of a home.
The purpose of a purchase appraisal is to affirm that the price being paid for the house is reasonable based on recent comparable sales (comparables) of similar properties in the same area. It is unusual for a purchase appraisal to come in below or above the purchase price because there is an assumption that the purchase price reflects the market value of the home.
If the appraised value does come in below the purchase price, the lender will use the appraised value, not the sales price, as the guide in determining the loan amount for which you can be approved.
Two important factors to know about appraisals:
If you feel that your property has been appraised for less than it is worth, and it is affecting your ability to get a loan, your lender may be able to work with the appraisal management company on getting the appraisal corrected. However, this is much more difficult than it was in the past. Sometimes the only way to get an increase in appraised value is to get a new appraisal. However, with the new regulations this can only be done by switching lenders—and, this doesn’t always work.
In a situation where you need an appraisal that is not for a refinance or purchase—a divorce, probate, or some other financial settlement—you may not want to rely on an appraisal obtained by another party. Appraisals always have a degree of subjectivity, and if you want to be sure you are being treated fairly, order the appraisal yourself.
Although a licensed appraiser can be found online, it is better to get a referral from a real estate agent or lender. If you contact me, I will refer you to an appraiser I have experience with who works in your area. To check the qualifications of an appraiser you are working with, you can visit the website of the California Office of Real Estate Appraisers.