How appraisals really work in Los Angeles, what happens when the number comes in short, and how to protect yourself in a bidding war.
You found the house, won the offer, and opened escrow. Then comes a step most buyers barely think about until it goes sideways: the appraisal.
Here's the thing. If you're using a loan, your lender won't lend against what you agreed to pay. They lend against what an independent appraiser says the house is worth. Most of the time those two numbers line up. When they don't, you want to already know your options.
How the appraisal actually works
Your lender orders the appraisal shortly after you open escrow. You pay for it, but you don't get to pick the appraiser or set up the visit. In California it usually runs somewhere around $500 to $1,000, more for big or unusual homes.
The appraiser walks the house, measures it, photographs it, and then compares it to recent sales nearby. In LA that last part is where things get interesting. Two homes on the same block can be wildly different: one has a permitted ADU, the other has a garage conversion nobody pulled permits on. A good appraiser knows the difference. A rushed one might not.
The three ways it can land
Right at your price: This is the most common result. Nothing changes and your loan keeps moving.
Above your price: Congrats, you just bought equity on day one. You're not obligated to share the report with the seller, and I wouldn't volunteer it.
Below your price: Now there's a gap between what you agreed to pay and what the bank will finance. Somebody has to cover it, or the deal changes.
If it comes in low
A low appraisal doesn't automatically kill a deal. Redfin lays out the usual paths well: the seller drops the price, you bring extra cash, you meet somewhere in the middle, or you challenge the appraisal with better comps. Lenders have a formal process for that last one called a reconsideration of value, and it works best when your agent has the right sales ready to go.
And if none of that works, the appraisal contingency in a standard California contract lets you walk away with your deposit, as long as you're still inside that window. That's the part buyers give up when they waive it to win a bidding war.
One more wrinkle worth knowing: HousingWire reports that with fewer sales happening, appraisers are working from thinner and older comps. That cuts both ways. Sometimes it helps you, sometimes it leaves a nice house undervalued.
Say you're buying at $1,000,000 with 20% down. The appraisal comes back at $950,000, and your lender will now only lend 80% of that.
| Original plan: $200,000 down, $800,000 loan | $200,000 cash |
| New loan: 80% of $950,000 | $760,000 |
| Cash needed to keep the full price | $240,000 |
That's $40,000 more than you planned, and you'd still be paying $50,000 over appraised value. That's why it pays to know your number before you write the offer.
My take
The appraisal is one of the only moments in a deal where someone with zero stake in it tells you whether the price holds up. The good news is it shouldn't catch you off guard. I run comps while we're putting the offer together, so I can usually give you a heads up if I think the appraisal might come in tight. Here's how I'd prepare:
Know your gap number before you offer. Decide how much cash you could actually bring if the appraisal comes in short. Writing that down ahead of time keeps a bidding war from making the decision for you.
Waive the appraisal the smart way. In a competitive bidding war, there are ways to write an offer with no appraisal contingency and still keep yourself protected. The key is working with a lender who can get the appraisal back within your inspection period. That way, if the value comes in low, you still have a window to renegotiate or walk. It's a risky tactic, so don't try it unless you're confident in both your lender and your agent.
Help the appraiser see the whole house. On the sell side, I hand the appraiser a list of upgrades, permits, and the best recent sales. With my construction background, I know which improvements actually add value and which are just pretty finishes.
Frequently asked questions
Who pays for the appraisal?
The buyer does when there's a loan involved. The lender orders it and picks the appraiser, and the fee usually lands somewhere around $500 to $1,000 in California.
What happens if the appraisal comes in low?
You and the seller renegotiate. The seller can lower the price, you can bring more cash, you can split the difference, or you can challenge the value with better comps. If you still have an appraisal contingency, you can also cancel and keep your deposit.
Should I waive the appraisal contingency?
Only if you can cover a gap or you've set things up so the appraisal comes back inside your inspection period. Waiving it blindly can leave you paying well over value with no way out.
Can I challenge a low appraisal?
Yes. Your lender can submit a reconsideration of value with comparable sales the appraiser missed. It works best with strong, recent, nearby sales.
Thinking about writing an offer soon? I'll pull the comps, show you where an appraisal is likely to land, and help you figure out how much room you really have. No pressure, just a straight answer.
Schedule a ConsultationRecent from the blog
You Found the Perfect House. Now What?
The inspections I push for every time, and the expensive surprises they help you avoid.
Read moreDoes Getting Preapproved With Multiple Lenders Hurt Your Credit?
Why shopping two or three lenders can save you real money, and how to do it without denting your score.
Read moreWhat Is a TIC? A Los Angeles Buyer's Guide
Why TICs often list below nearby condos, and how ownership, financing, and resale really work.
Read moreTrusted by Clients
With over 200 five star reviews, our past clients rave about our exceptional customer service and commitment to transparent transactions.
Read Our Reviews
Jeremiah Vancans
Real Estate Agent, Vancans Group | Compass
jeremiah@vancansgroup.com
CELL: 310.363.1416
OFFICE: 310.299.9305
DRE: 01944484