What are Some Tips and Techniques for Efficiently Evaluating Property Valuation reports?

When you’re buying a home, the appraisal report lands on your desk full of numbers, terms, and comparisons. Most buyers skim through it. That’s a mistake. Knowing how to read and evaluate the report gives you an edge in negotiations and helps you avoid paying more than a property is worth.

Here are practical tips and techniques to make sense of the appraisal process and the valuation report that follows.

A property valuation report (or appraisal) is designed for the lender, but you pay for it and rely on it.

• It estimates the home’s fair market value.

• It prevents your lender from financing more than the property is worth.

• You cover the fee, usually rolled into closing costs.

• If the appraised value comes in low, your financing may fall short.

The report itself usually includes:

• Estimated fair market value

• Method used (sales comparison, cost, income)

• Overview of the property’s size, features, and condition

• Market trends in the area

• Notes on limiting conditions like easements or structural issues

First-time buyers should read this document carefully. It’s more than a formality.

Your lender orders the appraisal, but the quality depends on the appraiser. You can’t choose them, but you can ask questions to confirm their qualifications.

• Licensed: entry-level authority, limited scope

• Certified: highest level, required for FHA loans

• At least 5 years for standard homes

• 10 years for unique or complex properties

• Verify they know your neighborhood

• Check if they use your local MLS for comps

• Ask if they’ve faced disciplinary action

Efficient evaluation starts with knowing if the appraiser was qualified to do the job.

Get Pre-Qualified and Save Up to 1.5% at Closing with reAlpha

Save up to 1.5% at closing when you combine real estate and mortgage services with reAlpha.

Check If You Qualify

Most valuation reports rely on the sales comparison approach. This section deserves your closest attention.

• The appraiser compares your property with recent sales of similar homes.

• They adjust for differences like size, lot, features, and condition.

• Comps should be recent (ideally within six months).

• At least three closed comps are required by Fannie Mae.

Pay attention to gross living area (GLA):

• Only above-ground finished space counts.

• Basements, even walk-outs, are excluded from GLA.

• Errors in square footage often skew value significantly.

If the comps feel off, ask your agent to review them. Wrong comps are one of the biggest red flags in appraisal reports.

The seller prepares the home for appraisal, but you should know what issues can hurt value. Appraisers check for:

• Roof damage

• Foundation problems

• Termite or mold issues

• Plumbing or electrical defects

• Unpermitted additions

A poor condition rating (C5 or C6 under Uniform Appraisal Dataset standards) may require repairs before lenders like Fannie Mae or Freddie Mac will approve financing.

Appraisals are not one-size-fits-all. Requirements vary by loan type.

About 8% of appraisals come in lower than the purchase price. If this happens, the report is your negotiation tool.

Options include:

• Paying the difference in cash

• Renegotiating the purchase price

• Asking the seller for concessions

• Walking away with an appraisal contingency

If you believe the report is flawed, request a Reconsideration of Value (ROV):

• Check for factual errors like square footage or room count

• Challenge bad comps with better ones

• Push for a second appraisal if errors are clear

Knowing how to read and question the report keeps you from overpaying.

Bias in appraisals is rare but serious. Efficient evaluation means staying alert.

Red flags:

• Inappropriate comps chosen from areas with different demographics

• Biased or irrelevant language in the report

If you suspect bias:

• Ask for a new appraiser

• Request an ROV

• File a complaint with CFPB, HUD, or your state appraisal board

Buying a Home? Get up to 1.5% Cash Back at Closing

Get pre-approval first, then start exploring homes knowing you can receive up to 1.5% of the home price back at closing.

Find your dream home

When reviewing your valuation report, focus on these techniques:

• Check the appraiser’s qualifications

• Review the comps and GLA carefully

• Look for property condition notes

• Confirm loan-specific requirements are addressed

• Have a plan if the appraisal comes in low

Efficiently evaluating a property valuation report is about more than reading the final number. It’s about checking the details, questioning the comps, and understanding how the report affects your financing and negotiations. The more comfortable you are with appraisal reports, the stronger your position as a buyer.