What Does Appraisal at Value Mean?

Real estate transactions can involve many confusing terms making it incredibly difficult to navigate the complicated process alone.  Price can often be the most difficult to determine to avoid feeling taken advantage of or missing out on a golden opportunity.  This article explores the dynamics surrounding a key term for success in navigating appraiser determinations: Appraisal at Value.

Appraisal at Value

A property's purchasing price and market value determine this measure.  Purchasing price reflects the amount the parties have agreed to trade the property for.  Market value is the monetary value of the property and is often determined by an appraiser, like North Sound Valuation. The purchasing price must equal market value to have an appraisal at value.

When Appraisal is Not at Value

At times, these two measures do not align.  The consequences differ for a buyer or a seller based on which measure is lower.  

Low Purchase Price

In some cases, the purchasing price of a property may be lower than its appraisal value.  When this occurs, the seller of the property is vulnerable to leaving money that could be in their pocket on the table.  And yet, a seller may be prioritizing benefits other than making the most money possible if they agree to sell their property below its appraisal value.



For the buyer, many conventional lenders will not lend up to the appraisal value of the home.  Instead, lenders base the amount of a loan on the lesser of the two amounts between the purchasing price and appraisal value.  Therefore, a buyer would still need to base their downpayment on the property on its actual purchase price no matter its appraisal value.  

Low Appraisal Value

When the appraisal value is lower than the purchasing price, an appraisal gap occurs.  Here, a lender will likely reduce the loan available to a buyer to purchase the property as it would not typically be a sound investment to contribute more money than the monetary value of the property.  Appraisal contingencies may be created in this circumstance, ensuring the buyer that if the property does not appraise for the price the parties agreed to the buyer can walk away from the sale with their deposit.



Otherwise, a seller may need to adjust the purchase price of the property to match its appraisal value in order to successfully execute the real estate transaction.  If the seller refuses to adjust the purchase price, then the buyer would need to be comfortable putting more money down on the property to cover the gap left by the lender's reduction, as well as paying higher mortgage rates.



Ultimately, it is typically in each party's best interest to work towards appraisal at value in order to secure the sale of the property.  An equal purchasing price and appraisal value ensure the pricing will not interfere with the buyer's ability to secure an appropriate loan from their lender and will ensure the seller reaps the monetary benefits of the value of the property.  An appraiser can assist in navigating the intricacies of this complicated process.