What A Home Appraisal Tells You
The home appraisal is the neglected middle child of the home buying process. In my experience, few buyers or sellers pay as much attention to it as they to do other aspects of the transaction like the inspection.
It makes sense. The appraisal is for the bank. And who likes the bank? Still, the appraisal is very important and has the potential to derail or delay closing. Here’s a few notes about it.
When Is It Done?
A home appraisal is usually done toward the end of the transaction. The price has been set, terms accepted, home inspection completed, and then some appraiser guy or gal pulls up to the house, walks around carefully studying the house for awhile, scribbles notes for their report, and then leaves.
If you’re fortunate, a few days (or weeks) later, you hear that the appraisal came back “at value” and with “no conditions”.
OK, great, what was that all about?
What Does It Do?
The bank is lending you an awful lot of money to buy a house. They want to make sure the house is worth all that money and that it’s a good investment for them too. I’m sure appraisers don’t appreciate me oversimplifying their job so much, but essentially the appraiser gives the bank a 3rd party answer to these questions:
is the house worth the purchase price?
are there any obvious safety or other concerns with the home? (not a full home inspection)
How Do They Determine The Home’s Value?
Some appraisers consult mystics and oracles. Others prefer to closely study animal entrails, the clouds or even horoscopes to determine home value. (I kid appraisers!)
Licensed, reputable appraisers use comparable home sales and a lot of complex math to determine the value of the home. Figuring out just how much a home is worth is more art than science in that there is rarely an exact, to the dollar value for a home - differing approaches, comparables and opinions could produce slightly different values. When you get an appraisal report back and it’s “at value”, what they’re really saying is “yes, based on comparable home sales and market conditions, this is a reasonable price for this home”.
And that’s usually good enough for the bank.
What’s The Appraiser’s Relationship to The Bank and The Agents?
Prior to the housing crash of 2008, there were some shady banks, agents and appraisers who were doing things they shouldn’t do, working together to produce unreasonable home values.
But in 2025, there are many more protections in place for homeowners and home buyers. Now, appraisers and appraisal companies are a true 3rd party to the transaction - banks and lenders are not typically allowed direct contact with the appraiser. Appraisal reports have to meet strict guidelines from the state. You can be confident that when you get an appraisal, you’re getting a true, professional and disinterested opinion on the value of the home.
Sometimes that means the home doesn’t come in at value and the price must be re-negotiated. Sometimes substaintially. I’ve seen appraisal gaps in the low six figures.
In the end, what does an appraisal tell you? Whether or not you can buy this house!
BONUS: What’s the Most Common Thing I See On An Appraiser Report?
In my experience, the number one issue, by far, that arises out of appraiser reports is not the price but the lack of smoke and/or carbon monoxide detectors and that they need to be installed before closing. Which appraisal or no, is a good idea to do anyway.
Michael Perrone is a licensed managing real estate broker in Washington State and is the owner of The Perrone Real Estate Group. You can reach his office at 425-224-6040 or by subscribing and responding to these newsletters.