What is the difference between a refinance appraisal and purchase appraisal?

alabama house value can be a puzzleThis week I got a call from a person asking me what the difference between a refinance appraisal and purchase appraisal was because they wanted to use the refinance appraisal to help them sell their home. This was a very good question that I’ve been asked often over the years.

Different Use, Different Value?

Some people think that a refinance appraisal may have a higher value than a purchase appraisal, at least that is what some have expressed to me, but that is not always the case. Both types of appraisals provide the appraisers opinion of the market value (both use the same definition of market value) of the property in question and both types of appraisals use the same sales, listings, and such however there is one difference between the two and that is the contract for the purchase of the home that is the subject of the purchase appraisal. The refinance appraisal does not have this one additional value indicator.

Blind Appraisal

I ran across this term years ago after reading an article by a fellow appraiser. It describes an appraisal where there is no value estimate given to the the appraiser in the form of a sales contract or other source such as an owners estimate. There is no number target that the appraiser is “shooting” for. At first the thought of an appraiser “shooting” for a certain value may comes across as unethical, however it all depends on where that number came from. If a value estimate was given to the appraiser, as it was many years ago but rarely occurs now due to recent legislation, and that value estimate consisted of what the borrower owed on their first and second mortgage as well as the credit cards they wanted to pay off then that would be wrong. Market value is not determined by how much you want to consolidate into a loan but rather what the majority of the market is willing to pay for a property.

These days when a bank orders a refinance appraisal they are not allowed to include a value estimate because that could be interpreted as the lender trying to pressure the appraiser to come in at a certain value. So in this situation the appraiser is required to research and analyze the current market and estimate the value based on recent sales, listings, and pending contracts. By using sales that involve a “willing buyer” and “willing seller” the opinion of value will more accurately reflect what is occurring in the current real estate market.

Targeted Appraisal

If an appraisal where there is no value estimate given is a “blind appraisal” would that make an appraisal where an estimate IS given a “targeted appraisal”? A purchase appraisal has one very important piece of information that a refinance appraisal does not have and that is a fully executed sales contract. If the contract reflects a price that is not influenced by undue pressure on either side of the transaction then it provides a very important piece to the value puzzle. It gives the appraiser another value indicator in addition to the previously mentioned sales, listings, and pending contracts. The appraiser does not look at the contract amount as a number to shoot for and then find sales to support this amount but instead they study and analyze the current market and then see how the contract compares to that indication of value.

If market data indicates an adjusted valued range from $150,000 to $155,000 and the subject is under contract for $152,000, then that contract amount is supported by what other knowledgeable buyers and sellers are paying for similar homes in the subject’s general market area. If, on the other hand, the same property is under contract for $160,000 then the contract would not be supported by market data and it would indicate that the property is over priced because the majority of buyers and sellers are not willing to pay $160,000 for a property that they could buy for $150,000 to $155,000.


So as you can see there is a difference between a refinance appraisal and purchase appraisal because the purchase appraisal provides one additional value indicator that the refinance appraisal does not have, however that little nugget of information must be supported by the market. If a refinance appraisal was done recently it can give you a reliable value estimate to use in marketing your home, however keep in mind that a new appraisal conducted after you get a contract will also take into consideration all sales that occur between the effective date of the refinance appraisal and the contract date. If you have any thoughts on this topic please leave a comment below and I’ll be sure to respond.

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  1. Geoff Walker says

    There’s a special case where the refi is at the end of construction and the loan is “construction-to-permanent”. If the rates have dropped substantially during construction (especially possible if construction took a long time), or if the original permanent portion of the loan was something that the owner doesn’t really like (such as a 10/1 ARM), then the owner will want to refinance the permanent part of the loan when construction is complete. If the refinance is with the same bank that provided the construction part of the loan, then the refi appraiser will have access to all the cost information that was provided to generate the pre-construction appraisal.

    Another aspect of this situation is if the house is custom and unique in the market. Getting an appraisal done on a unique custom house can be difficult and expensive. If the same bank and appraisal firm is used for the refi, the appraiser is starting with a big advantage because he’s already appraised it for pre-construction, and he already understands and accepts the uniqueness.

    • Having completed the appraisal originally definitely gives the appraiser an advantage over one that has no prior knowledge about it. Thanks for sharing your thoughts.

  2. Christine says

    Hi Tom,

    We purchased a home about a year ago. We are currently refinancing for a lower rate and also to try to drop PMI. In your opinion, is it advantageous or disadvantageous to have the same appraiser re-appraise the home? My worry is that the original appraiser will look at her original assessment and let that be a barometer or influence her appraisal whereas a new appraiser wouldn’t have a contract of sale and know the purchase price(even though all of that is public and they probably would)and have that factor into the appraisal. You see, we got the house for an extremely good deal, way below what anything has sold for in our neighborhood. It was outdated, cluttered, etc. We’ve done a lot of updating and tons of work on the house. In my opinion, it was worth more at the time we purchased it than what it appraised for(about 5k over purchase) but my guess would be it’s pretty standard for a purchase appraisal to come in close to the purchase price? We need it to appraise for about $40,000 more(to be at 80/20)and knowing she did the appraisal only a year ago, I don’t know how likely she would be to reappraise it at that much higher even with all the updates we’ve made. Would we be better off going with another appraiser(fresh set of eyes)who may not factor our original purchase price into the equation and strictly use comps, current condition, etc? I hope this makes sense. Thanks so much for your time!

    • I’m not sure that you would necessarily get the same appraiser. Most banks rotate their appraisers so the chance of you getting the same appraiser (if it’s with the same lender) is low. Even if you do get a new appraiser they will have to report and consider the price you paid last year. Appraisers have to report on and analyze any sale or listing of the subject property within the prior three year period. If you did get a great deal when you bought it then the appraiser will be able to see that by looking at what other homes have sold for. It sounds like you got a good deal because it was outdated and not in good condition. Whoever you get as an appraiser I would make sure that you provide a detailed list of exactly what you did to the home since buying it along with the cost if you have it. In addition, if you know of any recent sales that would be good comps I would provide this information to the appraiser. Many markets have been increasing recently so the natural appreciation along with the improvements may be enough for you to drop PMI. Good luck.

      • Thanks for the reply! That’s what I thought until I spoke to her and she told me that she was in fact the one that did it last year. Is she required to pull new comparable homes that are more recent or is she allowed to use the same properties she used in the last one? A couple of them were questionable comparison-ie, less square footage, one less bedroom. Thanks again for your time!

        • She will most likely pull new comps, especially if it’s been about a year. The only time older sales would be used is if the property is in an area where there aren’t many sales but this is rare. Ideally, I prefer comps that are less than 6 months old if possible because that is going to give you a better picture of what is currently happening in the real estate market. Again, make sure you give her the information about all that you’ve done to the house as well as any newer sales that you know of.

  3. We had an appraisal done in January of 19 as we considered a reverse mortgage. We decided against as we didn’t like the fees etc. We are now going with a refi. It has been approved. How long do they have to request the appraisal? They are trying to tell us they can’t find an appraiser in our area (they go with a pool selection) even after we gave them a list of 4-5 that was recommended by the local title company. Also, we have an appraisal from the one in January…can they call the appraiser and request to use that one? We are beginning to feel like they are really stalling on this loan. It took them forever to do the underwriting even though they had all documentation. Is there some kind of legal action or bug we can put in their ear to get them moving?

    • Those are good questions. There are no guidelines that I know of for when they order the appraisal. I guess that would be a bank question. I would think it would depend on your rate lock, etc. The will not be able to use the old appraisal even though it was recently done because they are not the client and the appraiser may not be on their list. I guess your new loan is with another lender? If so and they don’t know any appraisers in the area I would think that they could ask the previous appraiser to do it and then get him approved with their bank. If not him then maybe the other appraisers that the title company gave you.

  4. We are refinancing our mortgage due to recent build up of debt with 2 people in college. using the appraised value from 2 years ago when we refinanced we could pay off all our revolving debt…the appraiser submitted an appraisal $52,000 less than the one done 2 years ago…..what do I do? We have maintained our home perfectly and even updated 2 of the rooms and painted the exterior updating the appearance.

    • I would first look over the appraisal to make sure there are no factual errors such as the size of the home, size of the land, or information relating to the updates that you have made to the home. You can compare the square footage from the older appraisal to see if it is similar to what the other appraiser had. It probably will not be the exact amount due to rounding but should be in the ballpark. If all of the factual information is correct you may want to consider providing additional sales for the appraiser to look at if there are any. If you know about a sale that occurred that you feel is similar to your home and they did not use it you can suggest it. This reconsideration of value must be done through the lender as you cannot directly speak with the appraiser after the appraisal has been finished. I hope this helps.

      • heather keller says

        Tom, you mentioned that you cannot speak directly with the appraiser after the appraisal has been submitted. Is there a rule that states this? Wondering since I reach out to my refi appraiser afterwards to gain clarification and ask questions. Hoping that wasn’t a faux pas.


        • It’s possible but that is not the proper protocol. The bank or lender is the client and not the borrower so the appraiser should get the permission of their client before talking with the owner. The appraiser is not supposed to discuss the value, however they can answer general questions.

  5. I am buying a home that was build in a planned community. The house was built in spring 2017 and purchased by the first buyer in June 2017 for 287k. They put 67k into the home, had it appraised for a refinance and the refinance came back at 405k in November 2017. I had an appraisal done and it came back at 335k. The comps the appraiser used in 2017 were not on the same block but were in another part of the community. (I am not sure why.). Why would a refinance appraisal come in higher than a mortgage new purchase appraisal more than a year later? Is that a sign that the area is depreciating? (The are still building in this community and most of the homes being built are more expensive than the one I am getting.)

    • It is hard to say without knowing all of the details. You say the sellers put $67,000 into the home? What type of improvements did they make? Something else that I am curious about is the comps the other appraiser used. You say that they are from within the same development but in another area. Is this other area superior to the one you are in? Some neighborhoods have a wide range of property values and if the previous appraiser used sales comps that were superior (therefore selling for more) and did not make appropriate adjustments then this could have resulted in the appraisal value being higher than it should have been. It could also be possible that the most recent appraiser use sales that were inferior to yours. As I said, it is difficult to determine what is going on without know more and being familiar with the market. You might want to ask the last appraiser why there is such a difference in value between the two appraisals.

  6. I purchased condo in April 2019, and am looking to refinance from a 30 year jumbo to a 15 year conventional mortgage with the same lender. The principal borrowed will be less with the new mortgage. Lender tells me that purchase appraisal of Feb 2019 will not suffice, but that a new appraisal is needed for a refinance. “it’s a rule”.
    Is this true, or is the lender not playing straight with me?

    • That could be a policy of the bank. While nothing may have occurred in the market to cause a reduction in value it may be their policy to get an up to date appraisal to support the loan decision.

  7. Wendy Smallwood says

    My house is on the market at $399,999, we are FSBO. I’ve just put $20,000 in renovations to the home (new flooring throughout, gutted and updated bathrooms, fresh paint throughout). I had an refi appraisal 1 year ago at $378,000 and a house down the street just closed for $420,000 (same model, 900 SF more). Just received contract for $360k, but buyer agent is not considering $420k house because it was not an arms length sale (all cash no appraisal). If my neighborhood has increased in value by 8.3% in one year per the city’s annual report and my property tax assessed value increased $20,000, why is my $399,999 price too high?

    • It’s difficult to say why there is a discrepancy without looking at all the information and even then, it would be hard for me to know since I am not familiar with the area. I will say that just because a sale is FSBO does not mean that it cannot be used, however, the value is never determined by only looking at one sale. It would depend on what the other sales and listings have sold for and are listed at. Keep in mind also that cost does not always equal value meaning that just because you invest $20,000 in your home does not mean it will increase in value by that much. Also, I would not go by what the city’s annual report said or what the tax assessor showed. The best bet would be to get a pre-listing appraisal to see how your home compares to other recent sales and listings in order to arrive at a list price that is based on current market data.

  8. Charlotte says

    I tried to refinance my house in March 2018, appraisal was done that came back really low, two houses were sold prior to my appraisal (Nov 2017 for 207K and Feb 2018 for 210K, my buyer is ready to pay 217K). I decided not to continue with the refinance in April and decided to sell instead, my realtor did not tell me that IF I had an appraisal done during refinance that will also be used if my buyer has an FHA loan. So now the loan officer for the buyer said we have to use the appraisal that was done at the end of march or wait till end of July (which is 4months wait time required according to FHA) to order another appraisal. I know the buyer’s situation is hard, they are set to move because of family emergency and the situation is tied. Can you please tell me if they are any ways around this? I cannot accept the appraisal done during refinance, what can I do to get the best possible outcome from this. Everything was set to go for closing until now. FYI we are located in Minnesota

    • You’ve asked an interesting question that I’ve never been asked before. Were you going to refinance your home into an FHA loan? If so then I can kind of understand why the loan officer told you what they did. Whenever you get an FHA loan your home is assigned an FHA case number which stays with the home for a period of time. I have never seen your situation where you initially did a refinance and now are selling your home. I have only seen where an appraisal was done for a sale, but the sale never went through and then they had to wait until the case number expired to get another one. If the refinance and sale appraisal are different types of loans (conventional or FHA) there should not be a problem. Also, if there were some sales that occurred between when the original appraisal was done and when your home went under contract then they can be used if they support a higher value.

  9. Susan McKendrick says

    Hello. I am in the process of doing a refinance of my condo to a 15 year fixed in order to drop the interest rate which is still at 6% as in 2005. It is being put through the HARP program but my lender said they still require an appraisal which I didn’t think they did when doing a HARP refinance. Also he says I can’t choose my own appraisal company and they have to put it through an independent third party management company who will randomly chose the appraiser. However, the $425 (originally $495 until I objected) price tag is way higher than the typical area price of an average $350 or even less. It’s a 1600 sf condo. Is this procedure correct or am I being misinformed? Thank you!

    • I have heard this same concern from other people as well. Whenever an Appraisal Management Company (AMC) is used, they add more fees so this could be the reason it is higher than normal. The only alternative would be to use a lender that did not use an AMC so the appraisal fee would probably be lower.

  10. We we recently had our house appraised because we wanted to refinance and get some cash out the appraisal went well the first time then it went to the back to the bank and they said no that it had to be redone it came back $30,000 less so we rejected that appraisal and they asked us to compare our house to properties in our area that are similar we could not do that because none of the houses and our area are similar is there anything we can do now because the second appraisal is definitely wrong

    • That’s interesting that they said it had to be redone. You might want to ask for a reconsideration of value. I don’t know where you are or anything about your house but I would questions which of the appraisals is correct. Maybe you could look at both reports to see what sales comps were used and see which ones would be considered most similar to your home. Good luck.

  11. Mr. Horn, need your input please. I am trying to do cash-out refinance on my rental home. The home can use a new carpet and a fresh paint. How much in appraised value $$$ can I lose for not having the new carpet and paint? The comps are around 420k in my area (Tracy, CA). I’d appreciate your input.

    • It is difficult to put an exact dollar amount on something like this, but it can certainly help the appeal of the home. When performing an appraisal the adjusted sales provide a range of value that we can use to reconcile a final value estimate. If the subject is in good condition I typically reconcile towards the upper end of the range to reflect the good condition.

  12. Recently had my home appraised for a refiance, the appraiser was from another county, completely lowballed the appraisal, was there approximately 25 minutes, this is 4.5 acre ranchette, this type of property is in high demand, it appraised 8yrs ago for 45,000 more than what he appraised it for now. I am told that this appraisal will remain for the next 2yrs, is this in fact so. Do I have any recourse? Home is in Colorado

    • Judy, sorry to hear of the problems with the appraisal. It is possible that since the appraiser is from out of area that they may not be familiar with the local market, however this may not always be the case. It would depend on how much work they do in the area and their knowledge of the area. I would not compare the value to what it appraised for 8 years ago since the market is totally different. The appraisal will not stay with the property so I would not worry about that. The only thing I can think of that you may be thinking of is with an FHA appraisal. They are assigned an FHA case number and that can stick with a property but not for 2 years. This is not the case with conventional appraisals. If you know of some additional sales that you feel would be similar to your home you can submit that to the lender for a reconsideration of value. Good luck.

  13. Joyce Hewes says

    My boyfriend wants to buy me out of our house and I got an appraisal on the house for 350,000…. and he says I need to see if I can get a loan first and he said his appraisal amount could be lower than mine, bottom line here is he thinks he can get re appraisal and it will come back lower

  14. What would be the difference in a income restricted home with these two with three financing versus selling. I am refinancing and I am told that current market value of my home is anywhere from 500,000 to 600,000 for comparable homes in my area . We have many multi million dollar houses around where I live. However it’s affordable housing so upon selling the home I have to use the restricted value. I’m hearing mixed messages from different lenders about which number you can use for the refinance. I just signed
    documents yesterday for the disclosure and to move forward with the appraisal for Fairmarket. The difference between what the county will allow the home to sell for at 377 Is there is some clause that would prevent me from using the five to $600,000 value I was told I could use for a refinance is quite a bit different than the 5 to 600,000 and impacts the numbers greatly. I am fearful of paying for an appraisal and finding that there is some clause that would prevent me from using the five to $600,000 value I was told I could use for a refinance.

    • That is interesting Tia. I have not heard of the situation you speak of but I would think that the lender would be able to let you know what value could be used. Sorry I could not provide any more insight into this but it sounds like it is specific to your location.

  15. Elizabeth says

    We are about to do a c/o refinance of our home to make updates to our flooring, kitchen appliances, counter tops, water filtration system and bathroom vanities. As these improvements will all improve the value of our home, is it appropriate to make sure the appraiser is aware of the updates we plan to make, and if so, can they base the valuation on the assumed value that our home will be after the updates are made? Is there something specific I should ask for when the come, so that this can be considered? The comparables will support it either way.

    Thank you in advance!!

    • Elizabeth, it depends on what kind of appraisal the bank wants. Sometimes they want to know the value after repairs and other times they want an “as is” value. You will need to talk to them to see if you can get the “as repaired” value to base the loan on.

  16. I recently entered an agreement to purchase a home from my parents, that we renovated together. Based on what they paid for it and put into it in the renovations we came to an agreement on a sales price and had a purchase contract drawn up. My lender provided this purchase contract to the appraiser upon ordering the appraisal. The appraiser, however, didn’t appraise it as a purchase transaction but rather a refinance transaction. Besides that mistake he counted a full bathroom I have as a half bathroom.

    Also, we don’t feel that he properly accounted for the improvements and updates we put into the house, which were significant. We completely gutted the kitchen and installed new cabinetry, counters, etc. We redid the bathrooms as well with new cabinetry, counters, updated plumbing for the sinks, new tiled shower and tub/shower surround. The entire house has new flooring, new texture and paint, updated electrical (mostly lighting), new moldings and trim, all new appliances. After all this it appraised this week at about $10 less/sq ft than it did 18 months ago before these improvements. Our local market hasn’t taken a dive during this time. The appraisal value came nowhere near the agreed upon and fair sales price.

    Our first complaint is that he didn’t process it as a purchase transaction taking our purchase contract in mind, and we want the appraisal to reflect that a purchase contract is involved. Should we ask (or demand) that a different appraiser do it? Seems to me we should.

    • Thanks for your question. You could either ask that the appraisal be revised to reflect the contract or ask for another appraiser although that would result in another appraisal fee. It may have been an oversight on the appraisers part to include the contract information, however the appraisal value may be correct. Since I don’t have access to all the information it is hard to say. I will say that the cost of the improvements may not be reflected in the market value of the home. What I would suggest is that you put all your questions in writing (one page so as not to overwhelm the appraiser) and submit it to the loan officer. I would ask if all of the renovations had been taken into consideration and if the appraiser knew what the contract price was going into the appraisal assignment. You also might want to let him know specifically what you did to the house. Good luck.

  17. We are refinancing to lock our mortgage at a low fixed rate. Four years ago we had out house appraised for a 5/1 arm loan. The appraiser had told me that our home valued less because of a couple of homes in our neighborhood. I was told from a financial adviser that they can’t do that for a refinance appraisal. I live in Indiana and I’m not sure if it applies here. Can you tell me if your neighbor can affect your value of your home if your refinancing to get a fixed rate?
    Thank you,

    • Thanks for your question Lori. If the homes in your neighborhood sold recently and are being used in the appraisal then yes, they can influence the value of your home. The goal of an appraiser is to get the most recent and similar sales to compare with the home they are appraising, and homes within the neighborhood are usually (there are exceptions) the best because they reflect what is going on with property values in your area.

  18. Thanks for mentioning us as a Trackback on your post!


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