What Happens During the Home Appraisal When Selling?
If you’re selling your home, the appraisal can feel like one of those steps where you’re not quite sure what’s going on.
Who orders it? What does the appraiser look at? Do you need to clean the house? And what happens if the appraisal comes in lower than your buyer’s offer?
The good news is that a home appraisal is usually pretty straightforward.
An appraiser visits the property, looks at its condition and features, considers comparable homes and other market information, and then prepares an opinion of the home’s value. When the buyer is using a mortgage, the lender typically wants this independent opinion before finalizing the loan.
As a Realtor® serving Ann Arbor, I help sellers understand the home appraisal process when selling so the appraisal doesn’t feel like a mystery.
Here’s what happens, step by step.
What Is a Home Appraisal?
A home appraisal is an independent estimate of a property's market value.
It’s different from a home inspection.
A home inspection is mainly about identifying problems with the property, such as a leaking roof, electrical concerns, plumbing issues, or other defects.
An appraisal is about value.
The appraiser is trying to answer a basic question:
What is this home likely worth based on the available market evidence?
The appraisal is generally ordered by the buyer’s mortgage lender, not by the seller.
That distinction matters because the appraisal is primarily there to help the lender decide whether the property provides enough collateral for the loan.
When Does the Appraisal Happen?
The appraisal usually happens after the buyer and seller have agreed on a purchase price and signed a purchase agreement.
The buyer’s lender orders the appraisal as part of the mortgage process.
The timing can vary depending on the lender, appraiser availability, and the transaction itself.
As a seller, you may receive notice that the appraisal has been scheduled. Sometimes the appraiser coordinates access through the listing agent or another person involved in the transaction.
You usually don’t need to be present.
In fact, it’s often easier for everyone if the seller isn’t there while the appraiser is working.
What Does the Appraiser Look At?
When the appraiser visits your home, they’re looking at a number of things that can affect value.
That includes the obvious things, such as:
Location
Size of the home
Number of bedrooms and bathrooms
Lot size
Overall condition
Age of the property
Garage and parking
Finished living space
Major improvements
Quality of construction
Functional layout
Exterior condition
Basement and other usable areas
The appraiser may also take photographs and measurements.
They’re not simply walking through the house and deciding whether they personally like it.
The goal is to gather information that can be used to support the property's estimated market value.
Location can also help explain how location can influence a home’s value, particularly when an appraiser is comparing the property with other recently sold homes.
The Appraiser Looks at Comparable Homes
One of the most important parts of the appraisal is the comparison to other properties.
These are commonly called comparable sales, or "comps."
The appraiser looks for recently sold homes that are similar to the property being appraised.
For example, a three-bedroom home in Ann Arbor is generally going to be compared with other homes that have similar characteristics, rather than a completely different type of property across town.
The appraiser may consider:
Location
Square footage
Number of bedrooms and bathrooms
Lot size
Age
Condition
Updates
Garage
Basement
Overall appeal
Recent sale prices
This is one reason pricing a home correctly before it goes on the market matters.
The appraisal doesn't happen in isolation.
The price you negotiated with the buyer needs to make sense within the context of the available market evidence.
Does the Appraiser Care If Your House Is Clean?
Yes and no.
You don't need your home to look like a magazine before an appraisal.
The appraiser isn't grading your housekeeping.
A little clutter isn't going to automatically cause a low appraisal.
But you still want the home to be easy to inspect.
Make sure the appraiser can access areas of the property that matter, including:
Basement
Attic, if accessible
Garage
Utility areas
Bedrooms
Bathrooms
Major additions or finished spaces
If an area is difficult to access, the appraiser may not be able to properly evaluate it.
So I wouldn't tell a seller to spend days trying to make the house perfect for an appraisal.
I would tell them to make sure the property is accessible, presentable, and easy to evaluate.
Should You Give the Appraiser a List of Improvements?
This can be helpful.
If you've made significant improvements to the property, make sure your Realtor® knows about them.
A simple list can include things such as:
New roof
New windows
Updated kitchen
Updated bathrooms
New furnace or HVAC system
Finished basement
Major landscaping improvements
New flooring
Addition or other significant improvements
Include approximate dates when you have them.
You don't need to create a giant sales presentation.
The point is simply to make sure important information about the property isn't overlooked.
What Happens After the Appraisal?
After the appraiser completes the inspection and research, they prepare an appraisal report.
The report includes the appraiser's opinion of value along with information supporting that opinion.
For the seller, there are usually three basic possibilities.
The Appraisal Meets or Exceeds the Purchase Price
This is the easiest situation.
If the buyer agreed to pay $450,000 and the home appraises at $450,000 or more, the appraisal generally supports the agreed-upon price from the lender's perspective.
The transaction can continue toward closing, assuming the other parts of the transaction are moving forward as expected.
The Appraisal Comes in Below the Purchase Price
This is where sellers sometimes get nervous.
Let's say the buyer offered $450,000, but the appraisal comes in at $435,000.
That creates a gap.
The lender may base the loan on the appraised value rather than the higher purchase price.
What happens next depends on the purchase agreement, the buyer's financing, and the willingness of the parties to negotiate.
Possible solutions can include:
The seller reducing the purchase price
The buyer bringing additional cash to closing
The buyer and seller splitting the difference
The parties challenging the appraisal
Another solution negotiated between the parties
There isn't one automatic answer.
This is where having an experienced Realtor® can be especially useful. The goal is to understand why the appraisal came in where it did and determine what options make sense for the transaction.
The Appraisal Comes in Higher Than the Purchase Price
This is usually good news for the buyer.
If the buyer agreed to pay $450,000 and the appraisal comes in at $465,000, the lender has an independent valuation that supports the purchase price.
But don't expect the seller to automatically receive the difference.
The buyer and seller already agreed on a purchase price.
The appraisal doesn't normally change that agreement simply because the property was valued higher.
Can a Seller Challenge a Low Appraisal?
Sometimes.
If there are strong reasons to believe the appraisal missed important information or used inappropriate comparable sales, the buyer's lender may have a process for requesting a reconsideration of value.
This is often called a reconsideration of value, or ROV.
The process and requirements can vary by lender.
If a low appraisal happens, don't immediately assume the house was "worth less."
First, look at the details.
Were the comparable sales appropriate?
Did the appraiser know about a significant improvement?
Was an important feature of the property missed?
Were there more relevant recent sales that weren't considered?
Those questions are much more useful than simply looking at the final number and getting upset about it.
Common Seller Mistakes Before an Appraisal
There are a few things I recommend sellers avoid.
1. Trying to Hide Problems
An appraisal isn't the time to cover up an obvious issue.
If there's a known problem with the property, discuss it with your Realtor®.
Trying to hide something can create bigger problems later.
2. Making Last-Minute Expensive Improvements
Don't assume you need to spend thousands of dollars right before the appraisal.
An improvement isn't automatically going to add the same amount to the home's value.
Talk with your Realtor® before making a major last-minute investment.
3. Forgetting About Finished or Improved Areas
If you've finished a basement, added an addition, replaced major systems, or completed significant renovations, make sure that information is available.
Documentation can be useful when appropriate.
4. Assuming the Appraisal Will Always Match the Offer
An accepted offer and an appraisal are two different things.
The offer reflects what the buyer agreed to pay.
The appraisal provides an independent opinion of value for the lender.
They often line up, but they don't have to.
What Sellers Should Do to Prepare
You don't need to panic when you hear the word "appraisal."
A few simple steps can help.
Before the appraisal:
Make sure the entire home is accessible.
Make sure garages, basements, and other important areas can be viewed.
Give your Realtor® information about major improvements.
Gather records for significant renovations if available.
Make sure the home is reasonably clean and presentable.
Let your Realtor® know about anything unusual that could affect the valuation.
Avoid making major last-minute decisions without discussing them first.
That's really it.
The appraisal is one piece of the larger selling process.
A Simple Example
Imagine you list your Ann Arbor home for $500,000 and receive an offer for $510,000.
You accept the offer.
Because the buyer is getting a mortgage, the lender orders an appraisal.
The appraiser visits the property, reviews the home's characteristics, researches comparable sales, and prepares the report.
If the appraisal comes in at $510,000 or higher, there's no appraisal gap.
If it comes in at $495,000, there is a $15,000 difference between the purchase price and appraised value.
At that point, the buyer, seller, lender, and Realtors® may need to work through the situation.
The important thing is not to jump straight to a conclusion.
Look at the appraisal, understand the reason for the valuation, and then decide what makes sense.
The Bottom Line for Sellers
A home appraisal is basically an independent opinion of what your property is worth based on the home's characteristics and available market evidence.
The appraiser will look at the property, consider comparable sales and other relevant information, and prepare a report.
You don't need a perfect house.
You do want the property to be accessible, and you want important improvements and features to be clearly documented when appropriate.
And if the appraisal comes in differently from the purchase price, don't panic.
There may be several ways to handle the situation.
If you're selling a home in Ann Arbor, having a Realtor® involved early can help you understand the pricing, preparation, and appraisal process before you get to the closing table.
Frequently Asked Questions
Does the seller pay for the home appraisal?
The appraisal is typically ordered as part of the buyer's mortgage process, with the cost generally handled through the buyer's loan-related expenses. The exact arrangement can vary, so check the terms of the transaction and loan.
Does the seller need to be home for the appraisal?
Usually, no. Access is generally coordinated so the appraiser can inspect the property without requiring the seller to be present.
Does a messy house affect the appraisal?
Normal clutter generally isn't what determines value. However, the appraiser needs reasonable access to the property and its important features.
What happens if the appraisal is lower than the offer?
A low appraisal can create a financing issue for the buyer. Depending on the circumstances, the parties may negotiate a lower price, the buyer may contribute additional funds, or the appraisal may be challenged through the lender's process.
Can renovations increase a home's appraised value?
Improvements can affect value, but the amount added isn't necessarily equal to what you spent. The appraiser considers the improvement along with the property's overall characteristics and comparable sales.
Thinking About Selling?
If you're considering selling your home, you don't have to wait until you've listed it to start thinking about the appraisal.
Pricing, recent comparable sales, improvements, condition, and the overall market can all matter.
A conversation with an experienced local Realtor® can help you understand what buyers and lenders are likely to see before you get too far into the process.
It can also help to understand what it’s like to live in Ann Arbor and what types of buyers may be drawn to the area.
Buyers may consider the character of the Ann Arbor community along with the home itself when comparing properties.
Nancy Arnold is a Realtor® with The Charles Reinhart Company serving homeowners in Ann Arbor, Michigan. She helps homeowners understand the selling process and make informed decisions about their real estate.
About the Author
Nancy Arnold, Realtor®
The Charles Reinhart Company
2275 W. Stadium
Ann Arbor, MI 48103
[email protected]
734-260-3505
