The Real Estate Appraisal Process | The Powers Playbook ep 21

What happens during a real estate appraisal, and why does it matter so much in a home purchase?

In this episode of The Powers Playbook, Aaron Powers breaks down the appraisal process from both the buyer and seller perspective.

After the home inspection, the appraisal is often one of the next major steps in a real estate transaction — especially when a buyer is using a loan. The appraisal helps determine the market value of the property and gives the lender confidence that the home is worth the amount being financed.

Aaron explains what an appraisal is, who orders it, why lenders require it, what appraisers look at, how loan type can affect appraisal requirements, and what happens if the value comes in high, low, or right at the contract price.

In This Episode

• What a real estate appraisal is
 • Why lenders order appraisals
 • How appraisal management companies work
 • Why the appraisal protects the lender’s interest
 • The difference between loan-based and private appraisals
 • Why appraisals are ultimately one person’s opinion of value
 • How comparable sales and recent market data are used
 • FHA, VA, and Conventional appraisal differences
 • When an appraisal waiver may be possible
 • How much appraisals can cost
 • What happens if the appraisal comes in high
 • What happens if the appraisal comes in low
 • How buyers and sellers may renegotiate after a low appraisal

Why Appraisals Matter

An appraisal is designed to confirm the property’s market value before a lender agrees to finance the purchase.

If a buyer is under contract for $500,000, the lender wants to know that the home is reasonably worth that amount before loaning money against it.

Best-case scenario: the home appraises at or above the contract price.

But if the appraisal comes in low, it can change the entire transaction. The lender may only finance up to the appraised value, which can force the buyer and seller to renegotiate the purchase price, cash needed to close, or terms of the deal.

What Happens If the Appraisal Comes In Low?

A low appraisal does not automatically kill the deal — but it does create a new negotiation.

The buyer may ask the seller to reduce the price to the appraised value. The seller may agree, refuse, or offer a compromise. Sometimes both sides meet in the middle, with the seller lowering the price and the buyer bringing additional cash to close.

Every situation is different, which is why having an experienced real estate agent matters.

FHA, VA, and Conventional Appraisals

Aaron also explains why different loan types can create different appraisal standards.

FHA and VA loans often have stricter property condition requirements, while Conventional loans may allow more flexibility depending on the property and lender.

Common appraisal-related items can include:

✅ water heater straps
 ✅ self-closing garage doors
 ✅ peeling exterior paint
 ✅ smoke detectors
 ✅ exterior damage
 ✅ safety or condition concerns

Understanding these requirements ahead of time can help both buyers and sellers avoid surprises during escrow.

Thinking About Buying or Selling in Las Vegas?

If you have questions about:

🏡 real estate appraisals
 📋 appraisal waivers
 💰 buying or selling strategy
 📉 low appraisal negotiations
 📍 Las Vegas or Henderson real estate

reach out anytime.

📧 info@powersre.com

About The Powers Playbook

The Powers Playbook is your guide to family, wealth, and real estate.

Each episode helps buyers, sellers, homeowners, and investors better understand the real estate process through practical conversations about strategy, negotiation, market trends, and long-term financial decisions.

Subscribe for more conversations about:

🏡 Las Vegas real estate
 💰 wealth building
 📈 real estate strategy
 📋 buying and selling homes
 👨‍👩‍👧 family-focused financial decisions

Transcript

SPEAKER_00 0:04

You've opened the powers playbook. Your guide to family wealth and real estate. Hello and welcome back to the show, everybody. Another episode of the Powers Playbook. Welcome in. Thank you for being here. Um, today we are running the play around real estate appraisals. So we are gonna talk all about uh what happens with an appraisal, what is an appraisal, uh, why does it happen? Uh, what does it look like from the point of view of the buyer versus the seller? Um, does it always happen? And kind of just go through all the specifics. Uh, we did a home inspection on the last episode. So if you didn't have a chance and you're interested in what the home inspection entails, go back and listen to that one. Uh today we'll be all about the appraisal, which is generally the next major step in a real estate transaction after the home inspection is completed. So we'll start off by like what is an appraisal? So a real estate appraisal is something that is ordered in order to find out what is the market value of a property. Okay. Um, this is ordered uh by a lender. The lender uses what's called an AMC, an appraisal management company that sends out the order to a third-party appraisal company. An appraiser picks up that order, and then they become the appraiser for that file or that property. Okay. The reason that the lender or bank or you know, lending institution, private, whatever it is, does this is in order to protect their interest in the asset. If they're going to loan you three, four, five, six hundred thousand dollars on a property, they want to be sure that they believe that it's worth the value of what you're paying. So that is the purpose of it. It's to make sure that we're not, you know, getting in too far over our heads. They don't want to give a buyer a loan for $500,000 if the property only appraises for $450,000 for instance. So that that's really what it is. It's their, it's their uh, you know, fail-safe or or their way of double checking the fact that the money that they're giving is is correct in the money that they're uh borrowing or allowing you to borrow, I should say. So that's the in essence of what it is. Um, you can do private appraisals, by the way. You don't necessarily have to get a loan. For instance, if you were selling a really unique property and you wanted to know, like, hey, what's my house worth? We look up comps and there really isn't anything quite like it, or it's a fully custom home or semi-custom home that's just kind of really hard to compare to others. Might not be the worst idea to get a private appraisal. The difference is that one's just not based on a specific loan type. Um, it would just be to kind of get the overall valuation of what we think that house would be worth on the open market. All right, so I'm gonna give you a little bit of my opinion in this episode as well, as far as appraisals go. Um it's not a perfect system, that's my opinion. Um, it is a system that we need, but I I don't know that we couldn't make better changes to it moving forward, but that's that's probably uh another episode. Um, but an appraisal in essence is one person's opinion of value. It is whatever that licensed appraiser believes the property to be worth. Now, yes, they are going to use a multitude of data, um, past sales, comparable sales, uh similar model matches, maybe in the same neighborhood or within close proximity. It's generally going to be all within a certain period of time, uh likely within the last six months, if possible. So all of these are data points that they're going to use, and it is still one person's opinion of value. That's my biggest issue with the appraisal process, is it doesn't allow multiple opinions to come up with an overall evaluation. It is just the appraiser's opinion of value. And there are some nuances to that. It gets double checked, a lot of different things. Um, and I always wonder if we hired three different appraisers on the same property, would they come up with three different values? And if that's the case, is the system really work if it's one person's opinion of value? So, anyways, that's my that's my soapbox on appraisals. And maybe we'll uh maybe I'll get on the board and help develop a different system one day. Um, so if we're doing an appraisal, it is generally ordered based on the loan type, meaning that you could have an appraiser go for a conventional loan, an FHA loan, a VA loan, a USDA loan, a private loan, a hard money loan. There's all kinds of different ones. Um most common are FHA, VA, and conventional, always will be. Your FHA and VA have more strict rules on appraisal. Conventional rules are a little less strict. So just keep that in mind. If you are uh a buyer, uh you may have to look for a property in better condition or with specific things that you know are not wrong if you're going FHA or VA. Whereas conventional, you may be able to get by with things that are not necessarily correct or repairs that need to be made, and they'll still move forward and fund the loan for you. On the selling side, same thing. If you're going to accept a contract with the FHA or VA buyer, then typically that appraiser is going to be a little bit more strict. They have certain things that they're going to look for that they could have conditions on, maybe the seller having to fix. So some really common ones we see are uh earthquake straps on your water heater. That's a big one. Your the door that goes from your garage into the house has to be self-closing. Um, there can't be any peeling paint on the outside of the house or any peeling paint on any wood outside of the house. Um, no big problems with like stucco falling off the house on the outside. So there's just specific things that they look for and call out a lot of times. Smoke detectors are another one. Whereas a lot of those things on a conventional property or a conventional loan may all pass without. So um these are really specific instances, and and you know, if if there is something or you have a question on that, let us know. I can try to answer it for you within the context of what type of loan or who your buyer or seller is. Um, the next piece that I want to cover is an appraiser's appraisal is not always needed. Some lenders or institutions or banks will allow you to get an appraisal waiver. So, what this means is they'll actually can waive the right to an appraisal. Now, most of the time, this is when the buyer has put down a considerable amount for down payment. And so the bank feels comfortable accepting the value of the contract as is, and they don't necessarily have to send an appraiser to the property. Typically, if you're putting over 20% down, it's more likely to get an appraisal waiver. If you're putting 40% or more down, it's much more likely that you may get an appraisal waiver, in which case you don't have to get the home appraised and you can save that money. Um, there are different viewpoints on that as well because they say, well, what if I do get it appraised and then it comes in lower, then maybe I can renegotiate. Um there's a lot of nuance to that too, and it it really just depends on the situation you're in. And what are you buying the house for? What do you want to risk? What are you comfortable with? So again, that's kind of more specific. We could probably go over that dependent upon what it means for you. Um so please put that in the comments. Let us know if you've got any anything specific that we'd like to go over or or talk about in a certain instance that maybe you went through or are going through. It'd be really interesting to know those. Those are always fun. Anytime we renegotiate in real estate, it it uh always comes with some uh some learning and some fun involved, in my opinion. So like uh like doing those. Not always the clients don't always love it because it's uh you know kind of stressful in in a moment, but um fun to to go through and try to negotiate our way through and uh see if we can make the deal happen. Um so back to um appraisal. Now you know you don't always get one. Um uh let's talk about money. So an appraisal appraiser uh generally will charge for an appraisal anywhere from maybe 450 on the low side all the way up to like 750, 800 on the high side. Um, you know, things have gone up recently, appraisals have started to get more expensive. If you're doing a private appraisal that's not contingent upon a loan, um you can definitely get them for cheaper than that. So um we do have some great appraisers that we work with on the private side of things. So if you do need something appraised outside of escrow, please let us know. I can definitely refer you to a couple people that could take care of you on that. Um, if it is uh ordered by the lender, you are in escrow on a purchase, then the money I I said to you up to 750,800 is is applicable and and and definitely will cost you. So an appraisal is one of those things that's a cost of doing business. If the appraiser goes out, appraises the property and it comes in low, still something you're you're likely paying for because they did their job. Okay. So what we're looking for is in the essence of completing your transaction, right, whether you're a buyer or a seller, the best case scenario is the home appraises at the value that you're under contract for. Meaning if we're under contract for a home at $500,000, we get the appraisal report back, comes in at $500,000, we're good to go. It means the bank is going to loan up to the amount you're purchasing for. Seller's happy because it appraised for the price they accepted, we're good to go. Okay. Other two options. It could come in high, which as the buyer is great because you move in with equity, meaning the appraisal could have come back at $510, but you were under contract for $500. You still get to purchase that property at $500, knowing that the appraiser believes it's worth $510, you automatically have $10,000 in equity when you move into the property. Now, seller may not love this, right? Because as the seller, you are selling your house for $10,000 under the market value or appraised value of the property. So, you know, to each their own on how you see that, but that is one option. Uh, other one is it could come in low. Okay, if an appraise if an appraisal comes in low, it just gives the buyer the ability to renegotiate with the seller. Reason being is it's a contingency in the contract because the bank or the lender is now only going to loan up to the appraised value. So if you're under contract of $500,000 and now the house is only worth $490, it changes the numbers on everything. Because they're only going to loan up to $490, not $500. So it could change your down payment, cash to close, kind of everything involved in the transaction, right? As a seller, it's also not great because if it comes in low, what's the buyer going to ask you for? The first thing they're going to do is they're going to ask to reduce the price down to the appraised value of the property. So you just went from them paying you $500,000 to potentially having to cut down the cost to $490. Right? So it's it's really not a win for anyone when it comes in low, especially because most of the time in transactions, sellers want to sell, buyers want to buy, right? Our job is to represent, to try to find a middle point that works for both parties and move the transaction forward. When an appraisal comes in low, it's kind of like we're starting over in a sense. We have to renegotiate that money. So buyer is always going to ask the seller to reduce. Seller can, you know, essentially counter back and say, um, you know, yes, I will or no, I won't. In that case, they can see if the buyer is willing to come up with any of that money to make up the difference. There are times where we negotiate somewhere in the middle, meaning that the seller says, okay, how about I sell it to you for $4.95? And the buyer says, Okay, I'll do that. I'll come up with the additional $5,000. You come down $5,000, we meet in the middle, kind of a fair shake on both sides. But it really just depends on whether that buyer who qualified for that home has an additional $5,000 to be able to make up that difference. If they don't, seller has a decision to make. They either reduce the price by $10,000 and move the deal forward and close, or say no, potentially have to put the property back on the market and start all over again with another buyer and try to now get a different appraiser to give them that same value or higher value up to the deal that they accepted. So it's a really tricky uh process if that happens. Um, thankfully, our market has been really consistent for the last few years. So it depends on when you're watching this video. Uh, right now we're filming in June of 2026. For the last two or three years, our market value or valuation of just price in general has been pretty at level across the board. So for us, it's it's really not hard to find out, figure out what most property should be worth on the market because we've got a lot of historical data to tell us. When the market is on the way up heavily or on the way down heavily, sometimes it makes it harder for appraisers because they have to look at, well, okay, here's what the last one sold for, but the market conditions are moving in this direction, so they account for that. So we as agents just have to, you know, look at our data, what's going on in the neighborhood, what's going on with comparable sales. You know, if we're rent, if we're representing a seller, they may want to sell for this price, right? But we may have to let them understand, hey, you know, you can try to sell for $550, but likely your property is going to appraise around $525. So unless we can find a cash buyer that's willing to get no appraisal, we likely are going to need to sell somewhere around this price, right? And so that's kind of the give and take that we play. Representing a buyer going in to make an offer on that property, they say, hey, I want the property, I love it. I'll I'll give them the $550. It's our job to say, hey, just so you know, we can offer $550, but the likelihood it's going to appraise there is pretty low. Market and data and comparables says the property is probably worth closer to $525. I think that's maybe where we should go. So that's where we come in, right, as professionals and real estate agents, is to try to help with that process of deciding where to offer, you know, where are they going to be at? Where could the appraisal come in at? Because we can negotiate everything else, but when it comes in and the appraisal comes in at a different value, now all of a sudden we have to put all the pieces back together. Right. So that is really where our professionalism and understanding of the market comes in as an agent, and what you should be looking for in the agent that you work with is to kind of understand and explain that process and try to set you up so that you get to go through the appraisal and not stop rather than it come in, you know, low all of a sudden you get surprised, and now we're trying to pick up the pieces and figure it out. So that in essence is the appraisal process kind of from start to finish. Um if we do, if we can't complete the purchase because of the appraisal on the buy side, you can get your earnest money back on the sell side. If the buyer is still within the contingency, you'd give them earnest money back, you'd put the house back on the market. Um, but again, it's not really a great outcome for either party. Um, so we do, you know, like to try to do our homework ahead of time. If you're paying cash, you do not have to get an appraisal. It is not a mandatory part of your transaction. You could choose to get one. Most people do not. Again, we'll give them a really good idea on our learnings about what the property is likely worth in the market. A lot of tools out there to to try to figure that out as well. Um, I feel like just the the general audience and public and all of you listening to this, you know, just in general in life, we're a whole lot smarter now with technology than we used to be. Like if you want to know what your property is worth, there's probably five websites you could look it up on before you call me, right? My job is to cut through that noise and give you a realistic valuation of what that means on the market, not just sitting at home on the computer, right? So I think that's maybe the difference. But in general, cash purchase, you do not have to get an appraisal. Sometimes people choose to, but not necessary. Depends on whether you want to spend the money to protect your investment, may also depend on what kind of house you're buying, right? We buying a $300,000 house cash that we know the value of, or we buying a $5 million house in cash. Where's our negotiating tactics and what is it worth to you at that point? So again, that's where we could get like in the details and kind of discuss for you specifically. Um, but that in a nutshell is your appraisal process. When you get through the appraisal, you move on, and uh we go forward and get your clear to close and get your your loan fully approved and we buy a house. Seller loves it too because they get to sell a house, right? That's that's the goal. So um, if you need anything from us, um, you know where to find us. Uh, you can email info at powersre.com. Uh we've got a great library of content out there and different things in the Las Vegas and Henderson real estate market, a lot of general real estate information as well and education. Uh, if you want to go and look us up. Uh, thank you for watching and we will catch you on the next one. Have a great day, everybody.