The independent valuation that determines loan amount.
A real estate appraisal is an independent, professional valuation of a property prepared by a licensed appraiser. Appraisals are required on virtually every real estate loan because the lender needs an objective determination of value to size the loan, calculate LTV, and manage collateral risk.
Residential appraisals use the sales comparison approach as the dominant method: the appraiser identifies 3–6 recent closed sales of similar properties in the same submarket, adjusts each comp for differences (size, condition, bed/bath count, lot size, etc.), and arrives at an indicated value range. The appraiser then reconciles the comps to a single indicated value — typically the figure that becomes the appraised value used by the lender.
Commercial appraisals use the income approach as the dominant method. The appraiser projects stabilized NOI based on market rents, vacancy, and expense norms, then applies a market cap rate to arrive at a value indication. The income approach is reconciled with sales comparison (recent commercial trades) and sometimes cost approach (replacement cost) to arrive at the final value.
Appraisal disputes are common when an appraisal comes in below the contracted purchase price or the borrower's expectation. Most lenders have a formal appeal process — the borrower can submit additional comps, raise factual errors, or request reconsideration of value. Successful appeals are common but not guaranteed; the appraiser has final authority on the report.
On commercial bridge and construction loans, the appraiser typically provides multiple values: as-is value (current condition), as-completed value (after the proposed work is finished), and as-stabilized value (at stabilized occupancy / rents post-completion). The loan amount typically caps at percentages of each value — usually with the most conservative being the binding constraint.
| Property: 18-unit Class B multifamily | |
| Income Approach | |
| Stabilized NOI / market cap rate | $2,340,000 |
| Sales Comparison Approach | |
| Avg price/unit × 18 (per recent comps) | $2,280,000 |
| Cost Approach | |
| Replacement cost – depreciation + land | $2,440,000 |
| Reconciled appraised value | $2,300,000 |
| Loan @ 70% LTV | $1,610,000 |
Residential: $400–700. Small multifamily (5–20 unit): $1,200–3,000. Mid-market commercial: $3,500–8,000. Large institutional: $10,000–25,000+. The borrower typically pays the appraisal fee.
An appraisal is a full report by a licensed appraiser, USPAP-compliant, valid for lending. A BPO (Broker Price Opinion) is a less formal value estimate by a real estate broker — usable internally by lenders for some purposes but not as a substitute for an appraisal on most loans.
Three options: borrower brings additional equity to close, the deal is restructured (smaller loan, renegotiated price), or the appraisal is appealed with additional comps. Appraisal appeals succeed maybe 25–40% of the time on legitimate comp grounds.
Sales comparison uses recent comp sales; best for residential. Income approach uses NOI ÷ cap rate; best for income-producing commercial. Cost approach uses replacement cost; best for special-purpose properties and new construction.
Yes, but the appraiser is required to maintain independence. You can submit comps and market data; the appraiser will consider them but retains professional judgment on the final value.
Matrix uses qualified appraisers and underwrites to realistic values — so the loan you sign at term sheet is the loan you close at funding.
