How Lenders Assign Appraisers – And Why It Matters
Lenders don’t pick appraisers directly. Instead, they rely on one of two methods:
1. Lender’s In-House Appraisal Panel
- Some lenders maintain a trusted network of appraisers they regularly work with.
- These appraisers are more likely to understand local trends, unique properties, and current market conditions rather than just relying on outdated comps.
- If an appraisal issue arises, there is often more accountability since the lender has an ongoing relationship with these appraisers.
2. Appraisal Management Company (AMC)
- Many lenders outsource to an Appraisal Management Company (AMC), which selects appraisers from a pool based on licensing, location, and availability.
- While AMCs try to make reasonable assignments, they don’t always prioritize market familiarity, which increases the risk of inaccurate or outdated valuations.
- The AMC takes a cut of the appraisal fee, meaning the appraiser earns less than they would if hired directly. This can lead to:
- Rushed appraisals with minimal market analysis.
- A “check-the-box” approach rather than a deep dive into unique property features.
- Errors or inconsistencies that rarely get challenged since Reconsiderations of Value (ROVs) are almost never granted unless there’s a blatant mistake.
Appraiser Shortcomings – Why an Appraisal Isn’t the Ultimate Measure of Value
While appraisers are licensed professionals, they are not infallible experts. Their reports are subject to:
- Limited Data Interpretation – Appraisers rely heavily on recent closed sales, but market trends shift faster than public records update. If they aren’t fully in tune with current demand, their valuation may lag behind the real market.
- Subjectivity & Bias – Two appraisers evaluating the same home can arrive at vastly different values based on which comps they choose and how they adjust for differences.
- Over-Reliance on Historical Data – In fast-moving markets, appraisers often undervalue homes because past sales haven’t yet caught up with rising demand.
- Errors & Omissions – Mistakes happen more often than people realize, but getting an ROV is extremely difficult unless the appraiser makes a clear factual error (e.g., misreporting square footage).
Why Do Appraisals Often Match the Contract Price?
One of the most common patterns in real estate is how often appraisals land exactly at the contract price—not higher, not lower. Why?
- The Contract Price Serves as a Psychological Anchor
- Even though appraisers are independent, knowing the purchase price subconsciously influences their valuation.
- Market Data Usually Supports It
- If buyers and sellers negotiated based on available comps, the appraiser can usually find enough data to justify the price.
- Avoiding Pushback & Extra Work
- If an appraisal comes in too high, the lender may question it. If it’s too low, it could trigger disputes or an ROV request. Many appraisers choose the path of least resistance—validating the contract price rather than rocking the boat.
- Lender & AMC Incentives
- Since appraisers working through AMCs make less money per report, they have less motivation to challenge values unless absolutely necessary.
The Reality: Appraisals Are Just One Opinion—And Often Less Reliable Than Market-Driven Pricing
It’s important to remember that an appraisal does not define a property’s true market value—it’s simply one individual’s interpretation of available data.
- The best measure of value is what a willing buyer and seller agree to in an open market.
- A seasoned real estate agent—who works in the market daily—is often better equipped to assess a property’s worth than an appraiser who may only visit the area occasionally.
- If an appraisal undervalues a home, it doesn’t mean the home isn’t worth the contract price—it just means the appraiser couldn’t justify it within their framework.
The Bottom Line
For sellers and agents, understanding the buyer’s lender’s approach to appraisals is key to avoiding unnecessary issues. Before accepting an offer, consider:
