Home appraisals cause more anxiety and confusion for buyers than almost any other part of the real estate transaction, and honestly, I've watched too many buyers panic unnecessarily or make poor decisions because they didn't understand how appraisals actually work. If you're buying in the East Bay, particularly in Lamorinda where property values are high and market conditions vary by neighborhood, understanding appraisals before you're in the middle of a transaction can save you stress and money.
Listen, an appraisal is simply an independent professional's opinion of what your home is worth, ordered by your lender to ensure they're not loaning you more money than the property can support. But the process, the methodology, and the potential outcomes are more nuanced than most buyers realize, and that's where people get tripped up.
Let me walk you through what actually happens during an appraisal, why they sometimes come in below the purchase price, and how you can prepare to avoid surprises that could derail your purchase.
What Actually Happens During an Appraisal
Understanding the appraisal process helps you know what to expect and when to worry versus when things are proceeding normally, and I want you to go into this knowing exactly what's coming.
After your offer is accepted and you're in contract, your lender orders an appraisal from a licensed appraiser. You pay for this, typically $500 to $800 for a standard single family home in the East Bay. The appraiser is independent, meaning neither you nor the seller nor the real estate agents control who gets assigned or what they conclude. This independence is important because it protects everyone, but it also means you can't influence the outcome.
The appraiser schedules a visit to the property, usually within a week or two of the order. They spend 30 to 60 minutes walking through the home, measuring rooms, photographing everything, noting condition and features, and observing the neighborhood. They're looking at square footage, number of bedrooms and bathrooms, lot size, condition, updates, and any issues that affect value.
After the site visit, the appraiser researches comparable sales, meaning homes similar to yours that sold recently in the same area. They're looking for properties with similar size, age, condition, and location that closed in roughly the past three to six months, with preference for more recent sales. This is where things get interesting because finding truly comparable sales in Lamorinda can sometimes be challenging.
The appraiser adjusts the comparable sale prices up or down based on differences from your property. If a comparable home had a larger lot, they adjust its sale price down to make it more comparable to yours. If it was in worse condition, they adjust up. These adjustments are somewhat subjective, which is where variation can occur and why two appraisers might reach slightly different conclusions on the same property.
Finally, the appraiser writes a report concluding what they believe the property is worth and sends it to your lender. The entire process typically takes one to two weeks from order to completed report, though it can take longer if comparable sales are hard to find or if the appraiser is backed up with work.
Why Appraisals Sometimes Come in Low
Low appraisals, where the appraiser's value comes in below your purchase price, happen for several distinct reasons, and understanding which one applies to your situation determines how you should respond. I've dealt with this situation many times, and it's never fun, but it's also not the end of the world.
The most common reason in competitive markets is that you simply paid more than recent comparable sales support. This happens when multiple buyers compete for a property and bidding drives the price above what similar homes have sold for recently. The appraiser looks at the data and concludes the market hasn't reached the price you agreed to pay, at least not yet based on closed sales. They're not wrong, you just paid ahead of where the documented market data shows values.
Sometimes appraisals come in low because the appraiser used weak comparables. Maybe there weren't many recent sales of similar properties, so they used homes that weren't great matches. Or they used older sales that don't reflect current market momentum. Or they failed to make appropriate adjustments for differences in condition, location, or features. This is particularly common in areas like Orinda where properties can be quite unique.
In rising markets, appraisals can lag because they rely on closed sales from months ago while current prices are higher. By the time a sale closes and shows up in appraiser databases, the market may have moved up further. This creates a gap between what appraisers see in the data and what buyers are currently willing to pay.
Occasionally appraisals come in low because the appraiser simply made an error, missed important features, or didn't understand the local market nuances. This is less common but does happen, and it's one reason why appraisal challenges sometimes succeed when you can point out clear mistakes or provide better comparable data.
In the current Lamorinda market where buyers are super picky and slow and have very little sense of urgency, low appraisals are less common than they were in 2021 when aggressive bidding was standard. But they still happen, particularly when buyers fall in love with a property and offer more than recent data supports because they're not thinking about the appraisal until it's too late.
What Happens When an Appraisal Comes in Low
If your appraisal comes in below your purchase price, you have several options, and I want you to understand them before you're in this situation so you can respond strategically rather than emotionally.
You can bring additional cash to make up the difference. If you agreed to pay $1.5 million and the appraisal comes in at $1.45 million, your lender will only loan based on the appraised value. If you were putting 20% down, you'd now need that 20% down payment plus the $50,000 gap in cash. Many buyers don't have this extra cash available, which is why this becomes a problem.
You can renegotiate with the seller to reduce the purchase price to the appraised value. In a buyer's market like we have now, sellers are often willing to negotiate because they don't want to lose the deal and start over. In a seller's market, they might refuse and move to backup offers. Right now in Lamorinda, most sellers will at least negotiate when appraisals come in low because they understand the market reality.
You can challenge the appraisal if you believe it's inaccurate. Your agent can provide additional comparable sales data or point out errors in the appraisal. Lenders will sometimes order a second review or full second appraisal if there's compelling evidence the first one was flawed. Challenges don't succeed all the time, but when there are clear errors or better comparables that weren't used, you have a reasonable shot.
You can split the difference with the seller, each compromising to keep the deal together. You bring some additional cash, they reduce the price somewhat, and you meet in the middle. This is often the most practical solution when both parties want the transaction to close.
You can walk away from the deal if your contract includes an appraisal contingency, which most do. You get your earnest money deposit back and start your search over. This is the nuclear option but sometimes it's the right choice if the numbers truly don't work and you can't or won't bring the additional cash needed.
How to Prepare and Avoid Appraisal Surprises
Smart buyers take steps before making offers to reduce the likelihood of appraisal problems, and this is where working with someone who knows the local market really matters.
Work with an experienced buyer's agent who understands local market values and can help you determine whether your intended offer price is supportable by recent sales. If your agent tells you that offering $100,000 over asking might create appraisal risk, listen to that advice. We're not trying to kill your dreams, we're trying to prevent a situation where you're scrambling for extra cash or losing your earnest money deposit.
Review comparable sales yourself before making offers. Your agent should provide this data, but understanding what similar homes have actually sold for recently gives you confidence about whether your offer price makes sense. Don't just look at list prices, look at actual closed sales because that's what appraisers will use.
Consider including an appraisal gap clause in your offer if you're bidding competitively. This states that you'll bring additional cash up to a certain amount if the appraisal comes in low. For example, "Buyer agrees to pay up to $50,000 above appraised value." This makes your offer stronger while capping your risk at a number you know you can handle.
Get pre approved with a reputable local lender who understands East Bay property values. Some lenders are more conservative with appraisals than others, and experienced local lenders can often give you guidance on whether a purchase price is likely to appraise based on what they're seeing in the market.
Don't waive your appraisal contingency unless you're absolutely certain you can and will proceed regardless of the appraisal result. I've seen buyers waive this protection to make their offers more competitive and then panic when appraisals came in low and they realized what they'd done. Unless you have the cash to cover any gap and you're committed to doing so, keep this contingency in place.
Appraisals in Different Lamorinda Neighborhoods
Appraisal dynamics vary somewhat across Lafayette, Orinda, and Moraga based on local factors, and understanding these nuances helps you prepare appropriately.
In Lafayette, the relatively higher inventory and good comparable sales data mean appraisals generally track well with purchase prices when properties are priced correctly. Lafayette probably has the biggest numbers right now in terms of active listings, which actually helps with appraisals because there are more recent sales to use as comparables. Problems arise mainly when buyers get emotional and overpay significantly compared to recent sales.
In Orinda, the focus on specific school boundaries can create appraisal challenges because buyers will pay premiums for certain locations that don't always show up in comparable sales adjustments. Orinda has seen the biggest increase in inventory over what's normal, but appraisers sometimes struggle to quantify how much extra a specific school boundary is worth compared to another part of town.
In Moraga, the smaller number of sales can make finding good comparables more difficult for appraisers. Properties with unique features like large lots or premium locations may not have perfect comparables, leading to more subjective valuations. This doesn't mean appraisals will come in low, it just means there's more room for variation in the appraiser's conclusion.
Across all three communities, properties in the $1M to $1.4M range generally appraise most reliably because there are more sales to use as comparables. Luxury properties above $2.5M can be more challenging because each home is more unique and comparable sales are fewer.
Moving Forward with Confidence
Appraisals don't have to be mysterious or scary if you understand how they work and prepare appropriately. The key is making informed offers based on recent comparable sales data, working with professionals who understand local market values, and having contingency plans if appraisals come in low.
In the current East Bay market, appraisal issues are less common than they were during the extreme seller's market of 2021 when buyers were offering wildly over asking on everything. But they still happen, and being prepared and understanding your options helps you navigate the situation calmly if it arises rather than panicking and making poor decisions.
If you're buying in Lamorinda and want guidance on whether your intended offer price is likely to appraise, or if you're already dealing with an appraisal issue and trying to figure out your options, let's talk. I can help you understand what recent comparable sales suggest about value and what options make sense for your specific situation. Because appraisals are part of the process, but they don't have to derail your purchase if you handle them correctly.
-Kelly
