The home appraisal is the fair market value of a home determined by a professional appraiser and based on comparable recent home sales in the neighborhood. Appraisals are typically ordered by the buyer’s lender to protect the lender’s interests – by comparing the appraisal price to the final sale price to ensure the buyer is not borrowing more than the home is worth.
If the home value appraises for lower than the final sale price (see appraisal contingency), the buyer may be able to renegotiate with the seller. If the seller is unwilling to lower the price, the buyer’s lender may ask that the buyer increase the down payment in order to make up the difference.
