What Hurts a Home Appraisal? Real Life in Real Estate
The short answer: Unique properties, limited comparable sales, extra parcels, deferred maintenance, and unusual features can all work against an appraisal. But the most important thing most buyers and sellers do not know is this: appraisers primarily rely on recent comparable sales and market data, not county tax-assessed values. Tax assessments are for taxation purposes and often do not match market value. And when the appraised value does not match what a buyer is willing to pay today, the gap becomes a negotiation.
The Deep Dive
Two deals from the Home 1st team illustrate exactly how appraisals can shape a transaction, and what it takes to get to the closing table when the numbers do not line up the way you expected.
The Extra Lot
The first deal involved a property that came with an extra lot. On paper it seemed like a clear value-add. The county had assessed that additional parcel at $4,500. Both the seller and the buyer assumed the appraiser would value it somewhere in that range.
The appraisal came in at $700 for the lot.
That kind of gap stops a lot of deals. But understanding why it happened is the first step to navigating it. Appraisers primarily rely on recent comparable sales and market data, meaning they look at what similar properties, including similar extra lots, have actually sold for in the area within a recent window of time. If there are few or no comparable sales, the appraiser has very little to work with. Tax assessments reflect a municipality's estimate of value for taxation purposes and often do not match market value. The two numbers can look completely different from each other, and both can be technically correct within their own framework.
In this case, the gap between $4,500 and $700 had to go somewhere. The seller could not simply absorb it. The buyer could not simply ignore it. What followed was a negotiation using the split-the-difference technique, where both sides moved toward the middle. The seller accepted a lower price than originally expected. The buyer came to the table with additional funds, money they borrowed, to bridge the gap. The deal closed. It took flexibility and honesty from both sides, and a team that knew how to keep the conversation moving rather than letting the appraisal become a dead end.
The takeaway: when a property includes extra parcels, outbuildings, or features that are difficult to compare to recent sales, the appraisal may not reflect what the county says those features are worth. Knowing that before you go under contract gives you a more realistic picture of where the negotiations may need to go.
The Berm Home
The second deal was a different kind of challenge. The property was a berm-style home, an earth-sheltered design that is energy efficient and architecturally distinctive but uncommon enough in this market that finding comparable sales is genuinely difficult. Rare homes are harder to appraise. When there are few comps, appraisers have less to anchor their value to, and the result can come in below what a motivated market is willing to pay.
In this case, the market was more than willing. Multiple offers came in. The accepted offer was over asking price. There was a cash backup offer waiting in the wings.
Appraisal waivers can occur in certain situations, but they depend on loan eligibility, underwriting findings, the property, and the strength of the overall file. They are not guaranteed, and they are not available in every transaction. In this case, multiple factors aligned: a strong buyer profile, a lender and agent who knew exactly what the buyer could do, a private residential lender rather than a conventional commercial bank, and a competitive market with multiple offers and a cash backup. When those elements come together, outcomes that seem unlikely become possible.
What Both Stories Have in Common
Two very different properties. Two very different outcomes. But the same underlying lesson.
An appraisal is an opinion of value used in the lending process. It can strongly influence a transaction, but buyers and sellers may still need to negotiate when the appraised value and contract price do not align.
What gets deals done in those situations is not luck. It is preparation, relationships, honest negotiation, and a team that has been in enough of these situations to know what options actually exist when the appraised value and the contract price are not in the same place.
According to the National Association of REALTORS® Confidence Index, appraisal issues were responsible for about 7 percent of recent contract delays, while about 5 percent of contracts were terminated overall in the prior three months. That number is lower than it has been in prior years, reflecting a more balanced market. But when appraisal gaps do occur, how your team handles them determines whether the deal closes or falls apart.
A Few Things Worth Knowing Before Your Appraisal
Appraisers use past comparable sales, not tax values, not listing prices, and not what you paid for improvements.
Unique properties are harder to appraise because there are fewer comps to draw from. Berm homes, earth-sheltered designs, properties with extra parcels, lakefront with unusual configurations, and homes with highly personalized features all carry more appraisal risk than conventional properties.
Deferred maintenance, visible disrepair, and unfinished projects lower appraised value because they signal cost and risk to buyers, and appraisers price that in.
An appraisal gap is not always a deal-killer. It is a negotiation. The split-the-difference approach, a price reduction, a buyer bringing additional funds, or a combination of both are all tools that experienced agents use to keep a transaction moving.
Appraisal waivers can occur in certain situations but depend on loan eligibility, underwriting findings, the property, and the strength of the overall file. They are not guaranteed and not available in every transaction.
If you are buying or selling a property with any unusual features, extra parcels, or limited comparable sales in this market, the conversation about appraisal risk is worth having before you go under contract. That is what we are here for.
Call us at 517.780.8090 or reach out online.
Home 1st Real Estate is a locally owned and independent brokerage at 2600 Airport Rd., Ste. 200, Jackson, Michigan 49202. Equal Housing Opportunity.
This article provides general educational information about the home appraisal process for buyers, sellers, and property owners in Jackson County and Southern Michigan. The information applies equally to all individuals regardless of race, color, religion, sex, national origin, disability, familial status, or any other characteristic protected under the Fair Housing Act.
Related reading from Home 1st Real Estate:
How Do You Buy a Home the Right Way in Jackson County and Southern Michigan?
Why Do Property Taxes Increase After You Buy a Home in Michigan?
What Do You Actually Own When You Buy a Property in Michigan?
Sources: National Association of Realtors, Confidence Index Survey, November 2025; HomeLight, How Often Do Home Appraisals Come in Low (homelight.com); Rocket Mortgage, What Hurts a Home Appraisal (rocketmortgage.com); Home 1st Real Estate, local transaction experience, Jackson County and Southern Michigan
