What Is a Home Appraisal?
A home appraisal is an unbiased professional opinion of a home's market value. It's conducted by a licensed appraiser who has no stake in whether you buy the home or what you pay for it.
Think of it like this: the lender is about to give you hundreds of thousands of dollars to buy a property. They want to make sure that property is actually worth what you're paying - because if you default on the loan, they need to be able to sell the home and recover their money.
Why the Appraisal Matters to You
- Protects you from overpaying - an impartial expert confirms the home is worth the purchase price
- Determines your loan amount - lenders won't lend more than the appraised value
- Affects your down payment - your loan-to-value ratio (LTV) is based on the lower of purchase price or appraised value
- Required for most loans - FHA, VA, conventional, and most other loan types require appraisals
The appraisal is your lender's reality check - and it can be yours too.
What Appraisers Actually Evaluate
Appraisers don't just walk through and guess. They use a systematic approach that compares your potential home to recently sold similar properties (called "comps") while adjusting for differences.
1. Comparable Sales (Comps)
The foundation of every appraisal. Appraisers find 3-6 homes that sold recently (usually within 6 months) within a reasonable distance (typically 1 mile or less).
2. Property Size & Layout
Square footage is king. Appraisers measure the livable space (not including garages or unfinished basements) and compare to similar homes.
3. Condition & Quality
From roof to foundation, appraisers assess the home's current condition. Major systems matter: HVAC, electrical, plumbing, roof age.
4. Location Factors
Neighborhood quality, school districts, proximity to amenities, traffic patterns, and view. In DFW, being in a top-rated school district can add tens of thousands to a home's value.
5. Upgrades & Features
Updated kitchens and bathrooms, pools, outdoor living spaces. Note: not all upgrades add dollar-for-dollar value. A $50,000 pool might only add $20,000 to appraised value.
6. Market Conditions
Is the local market trending up, down, or stable? How long are homes sitting on market? Are prices rising or falling?
The Appraisal Timeline: What to Expect
From the moment your lender orders the appraisal to when you get the results, here's what happens:
Lender Orders Appraisal (Day 1)
After you go under contract, your lender orders the appraisal through an Appraisal Management Company (AMC). This is typically done within the first few days of your contract period.
Appraiser Assignment (Days 1-3)
The AMC assigns a licensed appraiser who knows the local market. In busy markets like DFW, this can take a few days due to high demand.
Property Visit (Days 3-7)
The appraiser schedules a visit to the property. The inspection typically takes 30-60 minutes. They'll measure, photograph, and assess the home's condition.
Research & Report (Days 7-10)
The appraiser researches comparable sales, makes adjustments, and compiles the formal appraisal report. This is where the real work happens.
Report Delivery (Days 10-14)
The completed appraisal report goes to the lender for review. You're entitled to receive a copy. Total timeline: typically 1-2 weeks from ordering.
In our hot market, appraisal backlogs can extend timelines to 2-3 weeks during peak seasons (spring and summer). Factor this into your closing timeline expectations.
What You'll Pay for an Appraisal
The appraisal fee is paid upfront and is non-refundable - even if you don't end up buying the home. Here's what to expect in the DFW market:
DFW Appraisal Costs (2025)
Who pays? The buyer pays the appraisal fee. It's typically collected by the lender shortly after you apply for the loan or when the appraisal is ordered. This fee covers the appraiser's time, research, and report - regardless of the outcome.
When the Appraisal Comes in Low: Your Options
This is the scenario every buyer dreads. You've agreed to pay $400,000 for a home, but the appraisal comes back at $385,000. Now what?
First, understand what this means: Your lender will only base your loan on the appraised value. If you're putting 10% down, the bank will lend 90% of $385,000 ($346,500) - not 90% of $400,000. You'd need to cover the $15,000 gap somehow.
Understanding Appraisal Gap Coverage
In competitive markets, buyers often include an "appraisal gap coverage" clause in their offers to make them more attractive. Here's how it works:
What It Is
Appraisal gap coverage is a promise from you (the buyer) to pay some or all of the difference if the home appraises below the purchase price, up to a specified amount.
Example in Action
You offer $400,000 with up to $15,000 in appraisal gap coverage. The home appraises at $390,000. You've committed to covering up to $15,000 of that gap, so you pay the extra $10,000 in cash, and the deal proceeds. If it had appraised at $380,000 (a $20,000 gap), you'd only be on the hook for your $15,000 commitment - the remaining $5,000 would need to be negotiated with the seller.
The Risk
You're committing to pay more than the home is worth (according to the appraisal). Make sure you have the cash reserves and that you're truly willing to pay that price for the home - not just caught up in competition.
Only offer appraisal gap coverage if you genuinely believe the home is worth your offer price AND you have the cash to back it up. Never stretch beyond your comfort zone just to win a bidding war.
Appraisal Gap Calculator
Use this calculator to understand how an appraisal gap might affect your cash requirements:
How to Challenge an Appraisal (Reconsideration of Value)
If you believe the appraisal is inaccurate, you can request a Reconsideration of Value (ROV). This isn't about disagreeing with the appraiser's opinion - it's about providing factual evidence they may have missed.
Valid Reasons to Challenge
- Missed comps: Similar homes that sold recently at higher prices that weren't included
- Factual errors: Wrong square footage, incorrect bedroom count, missed features
- Inappropriate comps: Foreclosures or distressed sales used as comps when market sales exist
- Incorrect adjustments: Adjustments that don't reflect local market realities
How to File an ROV
- Work with your real estate agent to gather evidence (better comps, MLS data, correction of errors)
- Submit the ROV request through your lender - you cannot contact the appraiser directly
- Provide specific, factual information - not opinions or emotions
- The appraiser will review and may revise the value (but isn't required to)
Most ROV requests don't result in a changed value unless there's a clear error or missed comparable. The appraiser is a licensed professional, and their opinion is their opinion. Come prepared with solid evidence, not wishful thinking.
How to Prepare for the Appraisal (As a Buyer)
While the seller is responsible for presenting the home well, there are things you and your agent can do to support a smooth appraisal:
Provide Comp Research
Ask your agent to prepare a list of recent comparable sales that support the purchase price. While the appraiser will do their own research, having this ready can be helpful if questions arise.
Document Upgrades
If the seller made significant improvements, have documentation ready (receipts, permits, before/after photos). This helps the appraiser accurately assess the home's condition.
Be Available for Questions
Your agent should be available if the appraiser has questions about the contract, the market, or specific features of the home.
Know Your Timeline
Understand when the appraisal is scheduled and when you can expect results. This helps you plan for contingencies if issues arise.
What Sellers Should Do (FYI for Your Knowledge)
While this is the seller's responsibility, knowing what they should do helps you identify potential issues:
- Ensure the home is clean, accessible, and shows well
- Make sure all utilities are on (especially important for HVAC testing)
- Fix obvious maintenance issues before the appraisal
- Provide access to all areas including attic, garage, and any locked spaces
- Keep pets secured or removed during the visit
DFW Market Reality: Appraisal Challenges
The Dallas-Fort Worth market presents unique appraisal challenges that you should understand:
Rapid Price Appreciation
When home prices rise quickly (as they have in much of DFW), appraisals can lag behind. Comparable sales from 3-6 months ago may not reflect current market conditions, leading to more frequent low appraisals.
New Construction Complications
In areas with heavy new construction (Celina, Princeton, Prosper), appraisers sometimes struggle to find good comps. New homes with premium features may appraise lower than their sale price due to limited comparable data.
Neighborhood Variation
DFW is massive, with significant price variations between neighborhoods - sometimes within the same zip code. An appraiser unfamiliar with micro-market nuances might miss important distinctions.
Competitive Offer Risks
When buyers bid significantly over asking price to win competitive situations, appraisal gaps become more common. This is especially true in desirable areas like Southlake, Frisco, and parts of Dallas.