How Does Listing Price Affect an Appraisal?

Appraisals can vary based on changing market conditions.
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The listing price of a piece of real estate is the sale price requested by a homeowner. It may be represent what the homeowner and his real estate agent feel is the current market value, or the amount of money the homeowner requires in order to pay off his mortgage. An appraisal price, however, is a trained expert’s advice on the true current market value of a property based on a variety of factors, and it typically does not affect a listing price in any way.

The Appraisal

Appraisers are professionals retained by banks, mortgage companies, insurance companies and real estate agents to examine properties and determine their value. An appraiser will look at other comparable properties -- or "comps" -- recently listed or sold in the same area. An appraiser will also examine the physical structure of the property and consider the impact that upgrades, additions and repairs have on the overall value. Anyone, including the seller and buyer, can hire an appraiser.

Listing Price

When a homeowner seeks the assistance of a real estate agent, the agent suggests an appropriate price range based on an analysis of comps, current market conditions, appraised value and how quickly the property owner needs to sell. If the owner agrees with the suggested range, the agent lists the house for sale. If the owner does not agree with the recommendation, he may find another real estate agent or list the property "for sale by owner" at whatever price he desires.

Financing a Sale

When the real estate market has frequent ups and downs, the appraised value of a property can fluctuate considerably from week to week. Many lenders conduct numerous appraisals of a property right up until closing on a loan to ensure they are not lending more money than the house is worth. If the appraisal dips below the listing price, buyers and sellers have several options. A seller can lower his listing price to match the appraisal, or a buyer can pay the difference between the listing price and the appraisal. For example, if the listing price of a house is $100,000 and the house is appraised at $90,000, a financial institution might loan only $90,000. The seller may opt to drop the price by $10,000, or the buyer may opt to pay the $10,000 difference.


While an appraiser is supposed to be an impartial third party who makes an independent, unprejudiced analysis of a property’s value, it’s important to remember that an appraiser earns his living by being retained by real estate and finance professionals. A property's value is open to interpretation, so appraisers will sometimes get a reputation for valuing properties high or low. A buyer’s real estate agent may hire an appraiser who values low so the agent and his client have grounds for making a low offer. Likewise, a seller’s agent may retain an appraiser who values high to justify or meet the seller’s listing price. Lenders and insurance companies understand this process and typically conduct appraisals of their own to ensure they know a property's true value.

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