Appraisal and Valuation

Appraisal and valuation pages explain how mortgage lenders evaluate property value and collateral acceptability. This section covers appraisal methods, comparable sales, property condition, repair and completion requirements, and situations where contract price and supported value do not line up.

Start Here by Valuation Problem

Start with Appraisal, Market Value, Appraised Value, Original Value, and Assessed Value to understand the 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, Economic Life, Remaining Economic Life, Physical Depreciation, Deferred Maintenance, 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 market-supported adjustments, used as one indication in the appraisal's value analysis.
• Appraisal
  An appraisal is a professional valuation of a property used to help a lender judge whether the collateral supports the mortgage.
• Appraisal Adjustment
  Market-based change applied to a comparable sale to account for a meaningful difference from the subject property.
• Appraisal Condition
  Property-related requirement arising from appraisal review that must be resolved before the lender can rely on the valuation or collateral.
• Appraisal Gap
  Difference between a purchase price and lower appraised value that may change LTV, loan amount, or cash to close.
• 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 inspection used to document whether repairs, construction, or other appraisal conditions were completed as required.
• Appraisal Repair Requirement
  Property repair imposed through appraisal and lender review that must be completed or otherwise 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 and Value Acceptance
  An appraisal waiver lets an eligible mortgage proceed without a traditional appraisal, though investor terminology varies.
• 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 a property's value, condition, legal status, access, or marketability may not adequately support the mortgage.
• Comparable Sale Selection
  Choosing the comparable sales that best support a mortgage appraisal value conclusion.
• Comparable Sales (Comps)
  Recent verified property sales selected for their similarity and usefulness in supporting a home's market value.
• 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
  Appraisal estimate of the amount needed to correct a property deficiency, used in condition, value, and collateral analysis.
• Deferred Maintenance
  Deferred maintenance is delayed property upkeep that can affect appraised value, marketability, repair conditions, and mortgage eligibility.
• Desk Review
  An appraisal review completed from the original report and available market data without a new field observation of the property.
• Desktop Appraisal
  A desktop appraisal is a valuation approach completed without a traditional full interior property visit.
• Economic Life
  The estimated period during which property improvements continue contributing value to the real estate in their market use.
• Effective Age
  An appraisal estimate of a property's apparent age based on condition, maintenance, updates, and market utility rather than year built alone.
• 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
  Appraisal value loss caused by adverse influences outside the property that affect buyer demand or market utility.
• Extraordinary Assumption
  Appraisal assumption treated as true for the analysis even though it could affect value if wrong.
• Field Review
  An appraisal review that adds direct property or market observation to evaluation of the original appraisal report.
• Final Inspection
  Follow-up property check used to confirm required repairs or completion items for a mortgage file.
• Functional Obsolescence
  Appraisal value loss caused by a property's design, layout, or features providing less market utility than competing homes.
• Gross Adjustment
  Total appraisal adjustment activity on a comparable sale before positive and negative changes offset.
• Gross Living Area (GLA)
  Common appraisal term for finished above-grade area in residential comparison, called above-grade finished area in newer UAD reports.
• 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
  Property valuation method that converts market rent or income expectations into an indicated value.
• 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 is expected to sell under normal market conditions, based on demand, utility, condition, legal rights, and financing access.
• Minimum Property Requirements
  Program-specific requirements used to determine whether a mortgaged home meets baseline safety, condition, access, utility, and collateral criteria.
• Minimum Property Standards
  FHA standards for new construction that supplement minimum property requirements for safety, soundness, security, and construction acceptability.
• Net Adjustment
  Combined positive and negative appraisal adjustments after they offset each other on a comparable sale.
• Original Value for PMI Cancellation
  Home-value benchmark used for federal borrower-paid PMI cancellation and automatic-termination calculations.
• Paired Sales Analysis
  Appraisal method for estimating an adjustment by comparing similar sales that differ mainly by one feature.
• Physical Depreciation
  Appraisal value loss in property improvements caused by age, wear, deterioration, damage, or deferred maintenance.
• Property Condition Rating
  A standardized appraisal rating that summarizes a dwelling's maintenance, wear, deterioration, repairs, and overall physical condition.
• Property Data Collection
  Standardized gathering of property information that can support some mortgage valuation workflows.
• Property Quality Rating
  A standardized appraisal rating that describes a dwelling's design, workmanship, materials, construction, and finish level.
• Property Rights Appraised
  Appraisal report field identifying the ownership interest or property rights being valued.
• Reconsideration of Value
  A reconsideration of value asks the lender to review an appraisal for material errors or overlooked valuation evidence.
• Remaining Economic Life
  An appraisal estimate of how long property improvements are expected to continue contributing value in their current market use.
• Safety, Soundness, and Security
  FHA property-acceptability framework focused on occupant safety, structural soundness, and the home's adequacy as mortgage security.
• 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.