Appraisal and Valuation

Appraisal and valuation pages explain how lenders and borrowers think about property value during a mortgage transaction. This section is about appraisals, value methods, tax assessments, and the situations where contract price and supported value do not line up.

Start Here by Valuation Problem

Start with Appraisal, Market Value, Appraised Value, and Assessed Value to understand the four value ideas borrowers most often mix up.

Then move into Appraiser, Subject Property, Property Rights Appraised, Highest and Best Use, Comparable Sales (Comps), Comparable Sale Selection, Sales Comparison Grid, Bracketing, Paired Sales Analysis, Appraisal Adjustment, Net Adjustment, Gross Adjustment, Adjusted Sale Price, Gross Living Area, Property Condition Rating, Property Quality Rating, Condition Adjustment, Location Adjustment, Time Adjustment, Value Reconciliation, Sales Comparison Approach, Cost Approach, and Income Approach to understand how appraisers support value for different property types and situations.

Finish with Appraisal Report, Effective Date of Appraisal, Appraisal Inspection, Appraisal Update, Appraisal Condition, Appraisal Repair Requirement, Appraisal Reinspection, Final Inspection, Effective Age, Remaining Economic Life, Functional Obsolescence, External Obsolescence, Cost to Cure, Marketability, Safety, Soundness, and Security, Minimum Property Requirements, Minimum Property Standards, Collateral Risk, As-Is Value, As-Completed Value, Subject-To Appraisal, Extraordinary Assumption, Hypothetical Condition, Appraisal Waiver, Appraisal Review, Desk Review, Field Review, Appraisal Gap, Reconsideration of Value, Exterior-Only Appraisal, Desktop Appraisal, Hybrid Appraisal, Automated Valuation Model (AVM), Property Data Collection, Broker Price Opinion (BPO), and Appraisal Management Company (AMC) to see how valuation issues show up in real underwriting and closing files.

In this section

• Adjusted Sale Price
  Comparable-sale price after appraisal adjustments, used to support a mortgage valuation conclusion.
• Appraisal
  An appraisal is a professional valuation of a property used to help a lender judge whether the collateral supports the mortgage.
• Appraisal Adjustment
  An appraisal adjustment accounts for meaningful differences between a comparable sale and the subject property.
• Appraisal Condition
  Condition or requirement from an appraisal that must be addressed before mortgage approval or closing.
• Appraisal Gap
  An appraisal gap is the difference between the agreed purchase price and the lower value supported by the appraisal.
• Appraisal Inspection
  Property observation step used in some appraisals to gather information relevant to mortgage valuation.
• Appraisal Management Company (AMC)
  An appraisal management company coordinates appraisal ordering, panel management, and quality-control functions between lenders and appraisers.
• Appraisal Reinspection
  Follow-up property review used to confirm required appraisal repairs or conditions were completed.
• Appraisal Repair Requirement
  Repair item identified through appraisal review that must be completed or resolved for mortgage approval.
• Appraisal Report
  Written valuation document that explains the property, market evidence, and supported value used in a mortgage file.
• Appraisal Review
  The lender-side check of a completed appraisal to confirm the report is usable, internally consistent, and fit for the mortgage decision.
• Appraisal Update
  Follow-up valuation work used to determine whether a prior appraisal remains usable for a mortgage file.
• Appraisal Waiver
  Lender acceptance of a mortgage file without requiring a full traditional appraisal.
• Appraised Value
  Appraised value is the property's value conclusion as stated in the appraisal report.
• Appraiser
  Valuation professional who develops the property value opinion used in a mortgage appraisal.
• As-Completed Value
  As-completed value is the expected appraised value of a property after specified repairs, renovations, or construction are finished.
• As-Is Value
  As-is value is the appraised value of a property in its current condition, before planned repairs or improvements are completed.
• Assessed Value
  Assessed value is the value assigned to a property for property-tax purposes by the local taxing authority.
• Automated Valuation Model (AVM)
  Computer-generated property value estimate that may support screening, review, or limited valuation workflows.
• Bracketing
  Appraisal technique that uses comparable sales above and below the subject property's key characteristics.
• Broker Price Opinion (BPO)
  A broker price opinion is a property value estimate prepared by a real estate broker or agent rather than a licensed appraiser.
• Collateral Risk
  Risk that the property may not adequately support the mortgage because of value, condition, title, or marketability issues.
• Comparable Sale Selection
  Choosing the comparable sales that best support a mortgage appraisal value conclusion.
• Comparable Sales (Comps)
  Comparable sales, or comps, are similar recent property sales used to help support a home's valuation.
• Condition Adjustment in Appraisal
  Appraisal adjustment for meaningful condition differences between a comparable sale and the subject property.
• Cost Approach
  The cost approach estimates value by looking at land value plus the cost to replace or reproduce the improvements, adjusted for depreciation.
• Cost to Cure
  Estimated cost to correct a property condition issue considered in appraisal and collateral review.
• Desk Review
  Appraisal review performed from the report and available data rather than a new field inspection.
• Desktop Appraisal
  A desktop appraisal is a valuation approach completed without a traditional full interior property visit.
• Effective Age
  Appraisal estimate of how old a property appears based on condition, updates, and remaining usefulness.
• Effective Date of Appraisal
  Date the appraiser's value opinion applies to, which may differ from the report completion date.
• Exterior-Only Appraisal
  An exterior-only appraisal is a property valuation that relies on exterior inspection and other data without a full interior walkthrough.
• External Obsolescence
  Value pressure caused by outside factors that affect the property's market appeal.
• Extraordinary Assumption
  Appraisal assumption treated as true for the analysis even though it could affect value if wrong.
• Field Review
  Appraisal review that may include an outside inspection or direct market check beyond the original report.
• Final Inspection
  Follow-up property check used to confirm required repairs or completion items for a mortgage file.
• Functional Obsolescence
  Value pressure caused by a property's layout, design, or utility being less useful to the market.
• Gross Adjustment
  Total appraisal adjustment activity on a comparable sale before positive and negative changes offset.
• Gross Living Area
  Finished above-grade living area used in many residential appraisal comparisons.
• Highest and Best Use
  Appraisal concept describing the reasonably supported use of a property that drives its value analysis.
• Hybrid Appraisal
  A hybrid appraisal is a valuation format in which property-inspection work and appraiser analysis are split into separate roles.
• Hypothetical Condition
  Appraisal condition used for analysis even though it is contrary to current fact or not yet true.
• Income Approach
  The income approach estimates property value by analyzing the income the property can generate.
• Location Adjustment in Appraisal
  Appraisal adjustment for location differences that affect a comparable sale's usefulness.
• Market Value
  Market value is the price a property would likely command in an open market under typical conditions.
• Marketability
  How readily a property can be sold, considered in appraisal, title, and mortgage collateral review.
• Minimum Property Requirements
  Loan-program property requirements used to decide whether a home is acceptable collateral.
• Minimum Property Standards
  Baseline property standards used in mortgage review to evaluate safety, soundness, and collateral acceptability.
• Net Adjustment
  Combined positive and negative appraisal adjustments after they offset each other on a comparable sale.
• Paired Sales Analysis
  Appraisal method for estimating an adjustment by comparing similar sales that differ mainly by one feature.
• Property Condition Rating
  Appraisal shorthand for the subject property's observed condition and how it compares with market evidence.
• Property Data Collection
  Standardized gathering of property information that can support some mortgage valuation workflows.
• Property Quality Rating
  Appraisal shorthand for construction quality and finish level used in property comparisons.
• Property Rights Appraised
  Appraisal report field identifying the ownership interest or property rights being valued.
• Reconsideration of Value
  Reconsideration of value is the process of asking for review of an appraisal when the borrower or lender believes the valuation may need adjustment.
• Remaining Economic Life
  Appraisal estimate of how long a property is expected to remain economically useful.
• Safety, Soundness, and Security
  Property acceptability concept used in appraisal review for hazards, structural issues, and collateral protection.
• Sales Comparison Approach
  The sales comparison approach estimates property value by comparing the home with similar recently sold properties.
• Sales Comparison Grid
  Appraisal report table comparing the subject property with selected comparable sales and adjustments.
• Subject Property
  Subject property is the home being appraised, underwritten, or otherwise evaluated in a mortgage file.
• Subject-To Appraisal
  Appraisal opinion based on specified repairs, completion, or conditions being satisfied.
• Time Adjustment in Appraisal
  Appraisal adjustment for market movement between a comparable sale date and the valuation date.
• Value Reconciliation
  Appraisal reasoning step that weighs valuation evidence to reach a supported final value conclusion.