Appraised Value
Definition and meaning of Appraised Value in real estate.
Appraised value is an objective estimate of a property's market worth at a specific point in time, determined by a licensed appraiser.
In more detail
The appraised value is calculated during the mortgage process by analyzing property size, condition, amenities, and recent sales of comparable properties nearby. It differs from market value, which is what buyers are willing to pay, and assessed value, which tax authorities use for property taxes.
Lenders use the appraised value to calculate the loan-to-value ratio and determine the maximum loan amount they will approve. If the appraised value is lower than the sales price, a valuation gap occurs that must be resolved before closing.
Key facts
| Category | Buying & Selling |
|---|---|
| Determined by | Licensed, independent appraiser |
| Used for | Loan underwriting and risk management |
| Contrast with | Market value and tax-assessed value |
When a buyer agreed to purchase a home, the appraiser determined the appraised value was lower than the contract price, requiring the buyer to renegotiate the price or pay the difference in cash.
Frequently asked questions
What happens if the appraised value is lower than the sales price?
The buyer must pay the difference in cash, renegotiate the price with the seller, or invoke an appraisal contingency to walk away from the deal.
Can the appraised value change over time?
Yes, the appraised value represents a snapshot in time and will change as market conditions, home improvements, or neighborhood factors evolve.
Does a home inspection affect the appraised value?
An appraiser conducts a basic walkthrough to note condition, but a detailed home inspection report is a separate process and does not directly set the appraised value.