"Why Appraisals Matter: Protecting Your Wallet and Your Investment"

Kimberly Smith
Mar 17
2 min read

When buying or selling a home, one word can make or break a deal: appraisal. It’s a key part of the real estate process that’s often misunderstood, but it plays a vital role in protecting both buyers and lenders—and ensuring that the home’s value aligns with the sales price.

What is an Appraisal?

An appraisal is a professional, unbiased estimate of a home’s value, conducted by a licensed appraiser. This value is based on factors like the home’s condition, location, square footage, upgrades, recent comparable sales (comps), and market trends.

Lenders require appraisals before approving a mortgage to ensure they aren’t loaning more money than the home is worth. In other words, they want to protect their investment, and the appraisal acts as a safety net.

Why Are Appraisals Important?

Protects Buyers from Overpaying No one wants to pay more than a property is worth. An appraisal ensures that you’re making a sound investment. If the appraisal comes in lower than the sales price, it could be a red flag that you’re overpaying—or that you need to renegotiate.
Protects Sellers from Undervaluing Their HomeFor sellers, an appraisal helps justify the asking price. It can support your case when negotiating with a buyer and help avoid delays caused by lender disputes.
Required by LendersUnless you’re paying cash, the lender won’t finalize your loan without an appraisal. It’s one of the final steps before getting that all-important "clear to close."
Impacts Loan ApprovalIf the appraisal is lower than the agreed sales price, the lender may reduce the loan amount, leaving the buyer to make up the difference or renegotiate with the seller.
Helps with Refinance or Home Equity LoansAppraisals aren’t just for buying and selling. They’re essential when refinancing or taking out a home equity loan. A higher appraisal can unlock equity; a lower one can limit your options.

What Happens if the Appraisal is Low?

This is one of the most common concerns. If a home appraises below the agreed sales price, there are a few options:

The buyer can pay the difference out of pocket.
The seller can lower the price.
Both parties can renegotiate to find middle ground.
In some cases, the deal may fall through.

Final Thoughts

Appraisals are a key piece of the real estate puzzle. They provide an objective value of the property, protect everyone involved, and help ensure a fair transaction. Whether you're buying, selling, or refinancing, understanding the role of appraisals can save you time, money, and headaches.

Please feel free to give me a call if you have additional questions.