Understanding Bank Appraisals: What Buyers Need To Know Before Closing
When you’re buying a home, the accepted offer is only the first step. Before your lender gives the green light on your mortgage, they need to know the property is worth what you’ve agreed to pay. That’s where a bank appraisal comes in and it can make or break a deal.
For many first-time buyers, appraisals may feel mysterious. Who chooses the appraiser? What are they looking for? And what happens if the value comes in short?
This guide breaks the process down clearly, so you feel prepared, informed and confident.
What Exactly Is a Bank Appraisal?
A bank appraisal is a professional, unbiased valuation of a property performed on behalf of the lender, not the buyer or seller.
The goal? To confirm that the home’s market value justifies the mortgage amount being requested. Even if you love the home and even if the seller believes it’s worth every penny — the bank wants to do their own due diligence on the property.
Why Lenders Require It
Banks lend based on risk management.
If the value is lower than the purchase price, the lender is essentially lending more than the property is worth, which is riskier for them. It also indirectly protects you from overpaying.
So the appraisal protects lenders from:
- Over-financing
- Market swings
- Property condition issues
- Pricing mistakes
- Buyer emotional decisions
Who Orders the Appraisal?
The lender hires the appraiser, not you and not your agent because appraisals must be independent and unbiased.
In most cases:
- The lender controls the process
- The appraiser reports back to the lender, not you. However, your mortgage broker or bank rep will share the report or summary once it’s complete.
What Appraisers Look At
Think of the appraisal as a big puzzle built from objective data.
They’ll analyze:
1) Comparable Sold Listings
Recent sales of similar homes in the area
(typically within the last 60–90 days)
2) The Property Itself
- Size (sq ft)
- Bedrooms/bathrooms
- Lot size
- Layout
- Parking
- Renovations
- Age of the building
3) Market Conditions
- Local supply & demand
- Current price trends
- Neighbourhood desirability
4) Condition of the Home
Renovated vs original
Well-maintained vs neglected
What Happens If The Appraisal Comes In Low?
This is the part buyers fear most. If the appraised value is lower than the offer price, you have a shortfall.
For example:
Purchase price: $900,000
Appraised value: $850,000
Shortfall: $50,000
In this situation, the lender will base your mortgage on the lower value, meaning you must cover the difference in cash.
You generally have 3 options:
- Pay the difference out-of-pocket
- Renegotiate purchase price
- Walk away (depending on conditions)
This is where your realtor, lender and lawyer step in as your shield. Lean on their support to help guide you in making an informed decision.
How to Avoid Surprise Appraisal Problems
Smart buyers prepare early.
Here’s what we suggest:
Don’t stretch above market value emotionally
Falling in love is easy and that’s where overpaying can happen.
Work with an agent who knows micro-market pricing
Your realtor should be able to flag overvalued properties early.
Choose a lender who moves quickly
Slow appraisals = stress.
Avoid waiving financing blindly
Unless you fully understand the risk.
Everything Considered..
The appraisal isn’t something to fear — it’s a checkpoint and ultimately protects you from overpaying.
It anchors emotions in reality, protects your financing, and confirms value.
As a buyer, understanding how this process works positions you to:
✔ negotiate confidently
✔ choose wisely
✔ and close securely
And when you work with us at the Odanovic Team, the appraisal becomes a tool and not a hurdle. Contact us today if you’re looking for an experienced team to support you in your buying journey every step of the way!