Home Appraisal Explained

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After inspections are underway, the next major valuation step in a real estate transaction is the home appraisal. At Real Estate Two70, we help buyers understand that an appraisal is not about whether they like the house — it’s about whether the lender believes the property supports the loan amount.

This page explains what a home appraisal is, who orders it, how it’s used in Idaho real estate transactions, and what happens if the appraised value does not match the contract price.

What Is a Home Appraisal?

A home appraisal is a professional opinion of a property’s market value, prepared by a licensed appraiser and used primarily by the lender.

The appraisal answers a single core question:

Is the property worth at least the amount the lender is being asked to finance?

Because the property is collateral for the loan, lenders require an appraisal before final loan approval.

What a Home Appraisal Is Not

  • It is not a home inspection
  • It does not evaluate cosmetic preferences
  • It is not based on what the buyer “feels” the home is worth
  • It is not ordered or controlled by the real estate agent

For a detailed look at inspections, see our Home Inspections in Idaho page.

Who Orders the Appraisal?

In most Idaho transactions, the lender orders the appraisal — not the buyer, seller, or real estate agent.

This happens after Lender Notification, when the lender receives the fully signed purchase contract and begins underwriting.

Buyers typically pay the appraisal fee, but the lender controls the ordering process to maintain independence.

What the Appraiser Evaluates

An appraiser evaluates both the property and the market. This usually includes:

  • Square footage and layout
  • Lot size and location
  • Condition and quality
  • Functional utility
  • Recent comparable sales (“comps”)
  • Market trends

The goal is to determine a supported value based on recent, similar sales — not to confirm the contract price.

How Appraisals Fit Into the Contract-to-Close Timeline

Appraisals usually occur:

  • After contract acceptance
  • After lender notification
  • Often alongside or shortly after inspections

Appraisal timing matters because it can affect financing deadlines written into the Purchase and Sale Agreement.

What Happens If the Appraisal Comes In at Value or Higher?

If the appraised value is equal to or greater than the purchase price:

  • The lender’s value requirement is satisfied
  • The loan can proceed toward final underwriting
  • The transaction typically moves forward as planned

In this case, the appraisal becomes a non-issue for most buyers.

What Happens If the Appraisal Comes In Low?

A low appraisal means the appraised value is less than the agreed purchase price.

When this happens, buyers generally have a few options:

  • Renegotiate the price with the seller
  • Bring additional cash to closing (if allowed and desired)
  • Terminate under an appraisal or financing contingency (if available)

Which options are available depends on:

  • The contract language
  • The loan program
  • Market conditions

FHA Loans and the FHA Amendatory Clause

For FHA-insured loans, appraisal issues are handled slightly differently due to the required FHA Amendatory Clause.

This clause allows the buyer to cancel the transaction and recover earnest money if the appraisal comes in below the contract price.

You can read a full explanation here: FHA Amendatory Clause Explained

VA, FHA, and Conventional Appraisal Differences

Different loan types have different appraisal standards:

  • Conventional: Focuses primarily on value and general marketability
  • FHA: Includes property condition and safety requirements
  • VA: Emphasizes safety, habitability, and fair value

This is why some repairs may be required for financing even if the buyer is comfortable with the condition.

Appraisal vs Inspection (Why Both Matter)

Appraisals and inspections serve different purposes:

Neither replaces the other.

How Appraisals Affect Earnest Money

If an appraisal issue leads to termination, earnest money outcomes depend on the contract’s appraisal or financing contingency.

For a full breakdown of how deposits are handled, see: Earnest Money Explained

How Real Estate Two70 Approaches Appraisals

At Real Estate Two70, appraisals are treated as a risk-management step, not a panic point.

We help buyers:

  • Understand appraisal outcomes calmly
  • Review options clearly if value issues arise
  • Coordinate communication between lender and title
  • Protect deadlines and contingency rights

Our goal is informed decision-making — not rushed reactions.

Frequently Asked Questions

Can buyers challenge an appraisal?

Sometimes. Buyers can request a reconsideration of value through the lender, but success depends on market data.

Do sellers see the appraisal?

Usually only if the buyer or lender shares it, or if it becomes part of negotiations.

Does a low appraisal kill the deal?

Not always. Many low appraisals lead to renegotiation rather than termination.

Who pays for the appraisal?

Typically the buyer, even though the appraisal is ordered by the lender.

Related Steps in the Contract-to-Close Process

Buyer Solutions

The Steps of Buyer Contract to Close