02/03/2026
Does the appraisal tell you the value of a home?
The short answer to this question is “no”, the appraisal does not necessarily give the true value of a home. What the appraisal does do is give one person’s professional opinion of value for a specific lender, on a specific day, for a specific purpose.
The appraisal is a lender-required risk assessment, based on recent comparable sales, using a standardized method (the Uniform Residential Appraisal Report), and it is focused on protecting the bank that is issuing the loan. It is a snapshot of value under tightly controlled rules – rules that satisfy the bank, but do not always give a full picture of what buyers are willing to pay. The purpose of an appraisal is not to tell what the exact value of the home is, but rather to protect the lender from loaning too much money.
So what can make an appraisal not totally accurate?
1. Appraisals look backward. Most of the time the appraiser is looking for sales that are 30-90 days old, and might even go longer if there are not many comparable sales available. In a market where prices are trending up or down, the market may have shifted since the sale occurred. Demand might also be affected by things like current number of homes on the market, changes in the interest rate, seasonal changes, neighborhood momentum. The market moves faster than the comparable sales data.
2. Appraisers can’t fully price emotional value. If you look at an appraisal form, it is largely made up of boxes with information filled in such as what is the size, how many bedrooms, does it have a pool? etc. Buyers, on the other hand often make value judgements on other factors and may be willing to pay more for homes with a rare floor plan, a beautifully remodeled kitchen, a killer backyard, etc. Appraisers are often not able to quantify those values like buyers can, and often do.
3. Appraisals are constrained by guidelines that can affect the homes they can use for comparables. The guidelines may require them to stay within tight comparable selection rules, they might be instructed to make their adjustments conservatively, and to avoid stretching value when the comparables don’t solidly reflect the value.
Market value is determined by buyers and sellers, not appraisers. The only true test of value is what a ready, willing and able buyer will pay for a home, and what a seller will accept for the home.