By Cathy Bossolina
Home appraisals are one of the most consequential steps in any financed real estate transaction, and one of the most misunderstood. An appraisal is a licensed third party's professional opinion of a property's fair market value, ordered by the lender to confirm that the loan amount is supported by what the home is actually worth.
For buyers and sellers in Ridgewood, as elsewhere, the appraisal process is best understood in advance. Here is that guide.
Key Takeaways
- Home appraisals are required for virtually all financed transactions: Lenders order appraisals to ensure they are not lending more than a property is worth (cash buyers are the primary exception)
- Appraisers use comparable sales to arrive at value, not the purchase price: The appraiser evaluates recent sales of similar homes and applies adjustments based on size, condition, features, and location
- A low appraisal does not automatically kill a deal: Buyers and sellers have several options when an appraisal comes in below the agreed purchase price, and knowing them in advance reduces pressure
- Sellers can prepare for and influence the appraisal outcome: Documenting improvements, ensuring full access, and addressing visible deferred maintenance all affect how the appraisal lands
How Home Appraisals Work
Home appraisals are ordered by the lender and conducted by a licensed appraiser who is independent of all parties. The appraiser inspects the property, measures square footage, notes condition and features, then compares the home to recent sales of similar properties to arrive at a supported value opinion.
- The sales comparison approach: The primary method used in residential appraisals, this approach identifies recent comparable sales and applies adjustments for differences in size, bedroom and bathroom count, age, condition, lot size, and features like finished basements or garages
- Condition and functional utility matter: Appraisers evaluate overall condition, floor plan functionality, mechanical system adequacy, and any visible deferred maintenance. A home with an outdated kitchen does not necessarily appraise lower than a renovated one, but failing HVAC, a leaking roof, or structural concerns carry adjustments that reduce appraised value
- Location factors are embedded in the comparables: In Bergen County, school district boundaries, commute access, proximity to town centers, and neighborhood character all influence value through comparable selection. An appraiser working in Ridgewood will choose comparables within the town wherever possible
The final report documents the methodology, comparables, adjustments, and concluded value the lender uses to determine the maximum loan amount.
What Happens When the Appraisal Comes In Low
A low appraisal creates a gap between what the lender will finance and what the parties agreed to pay. That gap must be resolved before closing.
- Renegotiate the purchase price: The most common resolution is for the seller to reduce the price to the appraised value. Sellers who accepted an offer contingent on financing have an incentive to reach agreement rather than re-listing
- The buyer covers the gap: Buyers can pay the difference between the appraised value and the purchase price out of pocket. This is most common when the buyer has strong conviction in the property's value
- Challenge the appraisal with a reconsideration of value: If comparable sales were overlooked, features were noted incorrectly, or the appraiser used out-of-town comparables when better in-Ridgewood sales were available, the lender can submit a formal reconsideration with documentation
Buyers whose contract includes a financing contingency can also walk away without penalty if the gap cannot be resolved.
How Sellers Can Prepare for an Appraisal
Home appraisals are not entirely outside a seller's influence. Condition, presentation, and documentation all have a legitimate effect on how the appraisal is conducted and what value it supports.
- Document every improvement in writing: Appraisers can only credit improvements they know about. A written list of completed renovations (like a new roof, updated kitchen, finished basement, or replaced HVAC) with approximate dates and costs gives the appraiser information needed to make appropriate adjustments
- Ensure full access to all areas of the home: Locked rooms, inaccessible attics, and blocked crawl spaces slow the appraisal and can result in areas being noted as uninspected
- Address visible deferred maintenance before the appraisal: Appraisers note overall condition, and visible deferred maintenance introduces negative adjustments that modest pre-appraisal attention can prevent
Sellers who approach the appraisal the same way they approach showing preparation consistently see better results.
FAQs
Who Pays for the Appraisal?
In most New Jersey transactions, the buyer pays for the appraisal as part of closing costs, typically between $500 and $700 for a standard single-family home. If a seller requests a pre-listing appraisal before putting the home on the market, the seller bears that cost separately.
Can a Buyer Request a Second Appraisal?
A buyer cannot unilaterally order a second appraisal, but the lender can submit a formal reconsideration of value if the buyer provides documentation of overlooked comparable sales or identifies factual errors in the original report.
Do Home Appraisals Affect Property Taxes?
A mortgage appraisal does not directly affect property tax assessments in New Jersey. Property taxes are based on municipal assessed value, determined separately by the local tax assessor's process. A high mortgage appraisal does not automatically trigger a reassessment.
Contact Cathy Bossolina
Whether you are buying or selling in Ridgewood, the appraisal is not a step to leave to chance. I work closely with my clients on both sides of the transaction to make sure they are informed, prepared, and positioned to handle whatever outcome the appraisal produces.
If you have questions about how appraisals work in this market, I'm happy to walk you through it. Contact me,
Cathy Bossolina, today.
