What Is an Appraisal?

Short answer

An appraisal is an independent, licensed appraiser's written opinion of a property's market value, ordered by the lender to make sure the home is worth the loan. The lender bases your loan-to-value on the lower of the purchase price or appraised value. Most Miami appraisals are completed within one to two weeks of being ordered.

Definition

A mortgage appraisal estimates market value by comparing the subject property with recent sales of similar homes nearby, adjusted for differences in size, condition, location and features. The appraiser works for the lender, not the buyer or seller, and is assigned through a neutral process.

Worked example

Contract price $520,000, 20% down, loan $416,000 (80% LTV). The appraiser finds three sales: $505,000, $530,000 and $515,000, and after adjustments concludes $510,000. Now LTV = $416,000 / $510,000 = 81.6%, which triggers PMI. To stay at 80% you need a loan of 0.80 x $510,000 = $408,000, so $8,000 more down, for a total of $112,000. Alternatively you negotiate the price down to $510,000, or the seller meets you halfway at $515,000.

How the appraisal works

• The lender orders it after you are under contract; you pay the fee, typically on the Loan Estimate in Section B.
• The appraiser visits, measures, photographs and researches comparable sales.
• The report goes to the lender, who must give you a copy before closing.
• Some conventional loans get an appraisal waiver from the automated system; FHA and VA have their own appraisal standards and require a full report.

If the appraisal comes in low

You have four paths: renegotiate the price, bring extra cash to cover the appraisal gap, request a reconsideration of value with better comparable sales, or walk away if your contract has an appraisal contingency. Your loan officer and agent should coordinate quickly because the financing deadline keeps running.

In South Florida

Miami appraisals have local wrinkles. Condo appraisers must compare within the same building or similar buildings, and view, floor and parking matter. Appraisers also note deferred maintenance, open permits and unpermitted additions, which are common on older Miami-Dade homes and can trigger repair conditions. On condos, the lender reviews the appraisal alongside the condo questionnaire and milestone inspection reports. Hurricane shutters, impact windows and a newer roof can help both value and your insurance quote.