"The quick answer is that it needs to cover the amount being financed." That would indicate 0% down, a rather hard to find loan outside of a VA loan. Appraisal >= Down payment + loan Down payments less than 20% need PMI, FHA special programs, or VA. 10% down and PMI is still around, and FHA may have a 3.5% or 5% program hidden somewhere (though there are caps on FHA loans usually well under the conforming limit).

Scarlett most people use comps rather than a appraisal to determine the list price of a house. Realtors I've spoken with say that they look at square footage and lot size of sold houses in order to find comps. I had an appraisal done in 2006 for a refinance. The appraiser went through my house and noted what had been upgraded. The final report was about 15 pages - you might be able to find a similar report online if you search for "Uniform Residential Appraisal Report". There were comments about the neighborhood, site, improvements (foundation/exterior/interior). The appraiser selected 6 comps and compared features, adjusting the value of my house up or down based on whether the comps had the same number of fireplaces, bathrooms, larger/smaller garage, square footage, etc. So for example, a house with one fewer bedroom than mine was adjusted down $10,000, and a house with one more bath adjusted up $5000. The appraiser didn't go inside any of the comps, so obviously he couldn't compare the conditions of the interiors. I don't know what part of CA you live in, but in the Bay Area there were quite a few problems when the new Federal rules came out requiring that the lender couldn't choose the appraiser. As a result, appraisers were coming in from the Central Valley with no knowledge of the market on the Peninsula. It was a mess and appraisals were coming in all over the place. So the best thing to do is find a local appraiser, preferably one who's been in business for 10-20 years. It's very tricky to set a listing price - see my post from last week on that very topic.

The problem with paying buyer costs (which, of course, really means buyer rolls the costs into the mortgage) is that in certain tight situations it can affect the appraisal. The sale price is higher, so it has to appraise for that, even though the property isn't truly selling for that price. Without rolling buyer costs into the loan, the property can appraise for less. Everything is negotiable but I'm unclear on how a seller can pay - up front - for the appraisal. It is ordered by the lender and paid for by buyer at that point. I as seller wouldn't hand it over to the buyer when I don't even know if the property will appraise or ultimately close. Are people referring to paying it BACK later on? (Is that all legal and allowable in today's loan environment?) BTW the appraisal and inspection are two different things and the appraisal isn't as in-depth in looking for problems, and typically comes after the inspection anyway. It's less likely to reveal things you need to disclose. But I wouldn't pay for either. If you as seller DO pay for the appraisal, then you probably find out the true (appraised) value for the house, while if the buyer pays, you would not typically find out. If it comes out much higher than the contract price you may feel resentful, try to renegotiate or find a way out of the contract, etc.. Not good for buyers, not good for sellers. (Just a thought. I think in some situations even the person who ordered the appraisal (usually the buyer...) doesn't know the appraised amount, just if it was high enough to support the loan.) This post was edited by lizzie_nh on Fri, Jul 4, 14 at 22:02

Appraisers look at other recently sold properties in the neighborhood. Then they adjust by square footage and general construction quality.