What Does a Home Appraisal Look at in Las Vegas, and What If It Comes in Low?

You are under contract. The inspection is behind you. Then somebody says the appraisal is scheduled, and if you have not been through this before, it lands as one more thing that could go wrong.

Here is what the appraisal is, what the appraiser actually looks at in a Las Vegas house, and what happens when the number comes back lower than the price. Most of the time it does not. When it does, it is a negotiation, not a disaster.

The appraisal is not for you. It is for the lender.

The buyer's lender is about to loan a large amount of money against a house, and it wants an independent opinion of what that house is worth before it does. So it orders an appraisal, usually through a management company that assigns a licensed appraiser neither side chose. The buyer pays for it. Neither agent gets to pick the appraiser, and neither agent is supposed to influence the number.

If the buyer is paying cash, there is often no appraisal at all, unless the buyer wants one for their own peace of mind.

The appraiser comes to the house, usually for less than an hour. They measure the square footage themselves rather than trusting the listing. They photograph every room, the exterior, the street. They note the condition, the age of the systems, upgrades, anything unfinished, and anything that looks like a safety issue.

Then they leave, and the real work happens at a desk.

They pull recent closed sales of similar homes nearby. In the Las Vegas valley that usually means the same subdivision or the same part of the neighborhood, homes of similar size and age that closed in the last several months. They adjust for the differences: a pool, a bigger lot, a third-car garage, a casita, a view of the mountains instead of a view of the neighbor's wall. Then they land on a number.

Las Vegas has a lot of tract housing, which helps here. When there are four floor plans in a subdivision and three of them have sold this year, the comparison is clean. It gets harder in older neighborhoods with custom homes, on unusual lots, or when the house is the nicest or the roughest one on the street.

They are not inspecting the house. They will note a missing handrail or a water heater that is not strapped, because the lender cares about safety, but the roof and the air conditioner are the inspector's job, not theirs.

They are not judging your decorating. Furniture, paint color and how clean the house is do not move the number in any meaningful way, though a house that presents well does make the condition rating easier to defend.

And they are not trying to kill the deal. Appraisers are working from the same recent sales I used to price the house. When the number matches, that is why.

Nobody talks about it again. The lender proceeds, and you go back to waiting on the loan. If the appraisal comes in above the price, the buyer does not get a discount and the seller does not get a raise. The contract price is the price.

This is the part people worry about, so here it is plainly.

The lender will only lend against the appraised value, not the contract price. If the house appraised for less than the buyer agreed to pay, there is a gap, and the gap has to be closed one of five ways.

One: the buyer covers the difference. They bring the gap to closing in cash on top of their down payment. Buyers who expected competition sometimes write this into the offer from the start.

Two: the seller lowers the price to the appraised value. Common when the market has cooled since the offer was written, or when the seller would rather close than start over.

Three: they meet somewhere in the middle. The seller comes down some, the buyer brings some cash. This is the most common resolution I see when both sides want the deal.

Four: the appraisal gets challenged. If the appraiser missed a better comparable sale or made a factual error, the lender can be asked for a reconsideration of value, with the additional sales attached. It works sometimes. It does not work because somebody is unhappy with the number. It works when there is a real sale the appraiser should have used.

Five: the buyer cancels. The standard purchase contract here carries an appraisal contingency, with a deadline. If the buyer kept it and the sides cannot agree, the buyer can walk and get the earnest money back. If the buyer waived it to make the offer stronger, they are on the hook for the gap.

One more thing worth knowing. If the buyer is using an FHA loan, that appraisal stays attached to the property for a period of months. The next FHA buyer inherits it. Which is one reason the reconsideration route matters more on an FHA deal than most people realize.

For sellers, the appraisal is one more reason the list price has to be defensible on day one. A house priced off the recent sales appraises. A house priced off hope does not, and the appraisal is where hope gets billed. When I price a home, I am already looking at the same sales the appraiser will, and I give the appraiser a clean package when they come: the upgrades with dates, the sales I used, anything about the house that does not show from the curb.

For buyers, the appraisal contingency is a decision, not a formality. Keeping it protects your earnest money. Waiving it can win a house in a competitive situation, and it means you are committing to close the gap yourself. I tell you which one I would do and why before the offer goes in, not after the appraisal comes back.

Call 702-881-6562 or email JArendt658@gmail.com. Whether you are selling and the appraiser is coming Tuesday, or buying and deciding whether to keep the contingency, tell me the situation and you will get a straight answer about what to expect and what I would do.

John Arendt, Realtor, has sold homes across the Las Vegas valley for 20 years, in Henderson, Summerlin, Southern Highlands, Anthem, Boulder City and North Las Vegas.

This article is general information about how appraisals work in a Las Vegas home sale, not lending or legal advice. Your lender and your purchase contract control your situation.