Overview
An appraisal is written for one audience, the lender.
While homeowners read the report, the appraisal is designed to answer the questions lenders and underwriters ask when assessing risk. This article explains how lenders interpret appraisal reports, what they focus on, and why certain details matter more than others.
Understanding this will help you prepare properly, avoid surprises and feel confident about the valuation process.
Financing decisions rely heavily on the strength and supportability of the appraisal.
When lenders review a report, they are not looking for opinions or estimates. They are looking for evidence. Every part of the report must be consistent, logical and backed by real market data.
If something is unclear, unsupported or inconsistent, lenders may pause funding, request revisions or decline the report. Knowing what they examine helps clients avoid unnecessary delays.
Core Lender Priorities
Lenders follow a predictable hierarchy when reviewing an appraisal. Their goal is to confirm that the value conclusion is reasonable, well supported and aligned with market behaviour.
Logical, Consistent Adjustments
Lenders look for adjustments that follow market behaviour.
Examples:
- Larger homes should adjust downward when compared to smaller ones
- Renovated homes should adjust against original condition homes predictably
- Lot premiums must be realistic and evidence based
These are the elements underwriters question immediately:
• Comparables far outside the neighbourhood
• Old sales used without time adjustments
• Unsupported lot premiums
• Large adjustments without explanation
• Missing or unclear photos
• Conflicting condition ratings
• Unverified upgrades
• Missing market commentary
• Value conclusions that contradict the comparables
Each of these raises risk and may require the lender to request revisions.
How Underwriters Review Reports
Underwriters approach appraisal reports with a structured, analytical process:
- They verify property details
They cross check public records, previous listings and internal databases.
- They test the comparables
They look at each comparable and ask,
“Would a reasonable buyer consider this property similar?”
- They check adjustment patterns
Adjustments must reflect market behaviour, not appraiser preference.
- They evaluate the logic of the reconciliation
The final value must align with the comparables, not exceed or stretch beyond them.
- They assess risk
Properties with legal issues, unpermitted work or unusual layouts receive extra scrutiny.
- They confirm compliance with lender standards
Institutional lenders, private lenders and mortgage insurers all have specific requirements.
Can lenders override an appraisal?
Lenders cannot change the value, but they can decline the report or request revisions if they feel the support is weak.
Can a client influence the appraisal?
No. The appraiser must remain independent. Clients can provide documents, but not direction.
What happens if a lender disagrees with a report?
They may request additional comparables, adjustments or clarification. In rare cases, they may order a second appraisal.
If you want clarity before your appraisal or you need help understanding lender expectations, our team is here to help.
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