Who knew

Are you wondering how appraisals impact DC real estate offers and contracts? Huzzah, we have a page for that! Read on and be sure to click me at the bottom to get started on your DC real estate adventure!

A home appraisal is a professional property valuation performed by a licensed appraiser, usually ordered by a lending institution to establish collateral value. Appraisals apply to many residential property types, including detached and attached single-family homes, townhouses, cooperatives and condominiums. Common reasons for an appraisal include new mortgage loans, home refinance loans, home seller valuations and tax assessment valuations.

Washington DC home appraisers use a number of approved methods of valuing real property, some of which are:

  • Market Research, including price per square foot during the previous 3-6 month period;
  • Sold-to-list price ratio for the same time period;
  • Market activity within a one mile radius for the same period;
  • Property comparison within the same radius and time period for similar dwellings, including age, condition, upgrades and additions and lot size;
  • Adjustments for differences;
  • Some lenders work with appraisal companies that utilize automated property valuation systems in addition to human field appraisers.

Offer terms are as important as the price offered for the home in the Washington DC real estate market. Agents balance terms and price to create the strongest possible offer package. Terms include escrow period, earnest money deposit, form of payment (cash, mortgage loan, assumption, etc.), special accommodations such as seller rent-backs, seller home-to-purchase contingencies, buyer payment of special assessments or seller closing costs, etc., and contingencies such as inspections, financing, and appraisal. 

When DC home buyers are financing a purchase, they often wish to include financing and appraisal contingencies. This assures the buyer that if the loan is denied, the earnest money deposit will be returned in full. Adding a separate appraisal contingency assures the buyer of the return of their full earnest money deposit if the appraisal value comes back lower than the home purchase price if the buyer and seller can’t agree to renegotiated terms. This seems understandable–even advisable–however in the aggressive DC real estate market, where homes sales outpace comps, and bidding wars are the norm, adding financing and appraisal contingencies can sour a seller on the buyer’s offer.

An appraisal contingency is one of the most important considerations for sellers when evaluating offers, especially in multiple offer situations. While the buyer who includes this contingency may make a higher purchase price or escalated offer, sellers know that the appraisal may come back below value, forcing them to negotiate the price down or walk away from the deal. That’s quite a gamble since taking a home off-market for one to three weeks to await appraisal results, then re-marketing it means they not only lost their original pool of eager buyers, but their property has been somewhat stigmatized by the fallout of the contract and increased days on market.


Appraisals are ordered by the Buyer’s lender, who becomes the appraisal’s client, even though the Buyer pays for the appraisal. Each lender works with an appraisal company, or “pool.”

Appraisal Management Companies (AMCs) are also an option for lenders. These are appraisal management companies who order, track and deliver appraisal reports.They’ve recently come under fire from appraisers, who say AMCs are delaying appraisals for days, even weeks, as lenders shop for appraisers with the lowest fees.

Affiliations with appraisal companies and AMCs are a considertation when selecting a lender.

Your loan officer is legally prohibited from contacting the appraiser directly–he or she must rely on the underwriting department for scheduling, review and correction of appraisals–but regulations allow real estate agents, or ‘other persons with an interest in the real estate transaction’ to communicate with the appraiser and provide additional property information.

The appraiser will determine if the property and loan qualify for a ‘desktop appraisal‘ generated using computer software, floor plans, and data from tax records and the MLS, or requires a full appraisal, with the appraiser inspecting the home in person, taking photos, measuring and evaluating the condition of the home firsthand. Generally, a desktop valuation is an option for homes in average condition, while a full appraisal is recommended for homes in below average or highly upgraded condition.

The Buyer’s lender will furnish the appraiser with a copy of the sales contract. Government Sponsored Enterprises (GSEs) require that an appraiser  must confirm analysis of the contract on the appraisal report. The appraiser looks at the terms of the contract and compares them with what is typical in the market, reviews the interest rate, down payment amount, seller contributions and any personal property items that might be included in the sale, such as furnishings. The appraiser must also verify that the property seller is the owner of public record.

Once the appraisal is completed, it is sent to the lender’s underwriting department for review. In its final form, the appraisal is released to the loan officer, who passes it on to the Buyer. If the value is equal to or above the sales price, the property has “appraised” and an appraisal contingency can be removed. If the value is lower than the sales price, the Buyer and Seller have options depending upon the terms of their contract:

  • The Buyer can opt to pay the difference between the appraised value and the purchase price. This has to be paid in cash, adding to the rest of the Buyer's closing costs
  • The Seller and Buyer can negotiate the purchase price down to the appraised value, or somewhere in between. The Buyer would be responsible for making up any difference as outlined above
  • The Buyer can challenge the appraisal. This is difficult to do and most often unsuccessful. A closing date extension may be required to facilitate  a re-appraisal if one is granted, or if the Buyer decides to change lenders.  Seller would have to agree to both.
  • The contract can be voided if its terms allow.

The GCAAR (Greater Capital Area Association of Realtors) contract form (2017) provides for the following conditions under the financing contingency clause and also shown below is the District of Columbia Appraisal Notice & Addendum to be added to the Addendum of Clauses in the event of an appraisal contingency:

It does not offer the same protections as a separate appraisal contingency. Ask your Realtor to advise you about appraisal ramifications and contingencies for your DC real estate transaction.


In July 2022, GCAAR (Greater Capitol Area Association of Realtors) revised the Addendum of Clauses form, which contains the clauses relating to appraisal contingencies, and the Appraisal Notice/Addendum form:

Addendum of Clauses – B (1339)

Revised: 7/2022

For use with GCAAR Sales Contract and Maryland REALTORS® Residential Contract of Sale.

Appraisal Notice and/or Addendum (1333)

Revised: 7/2022
For use with GCAAR Sales Contract and Maryland REALTORS® Residential Contract of Sale.

The District of Columbia Board of Real Estate Appraisers regulates the real estate appraisal practice, including the functions of a state appraiser certifying and licensing agency under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, approved August 9, 1989. The Board protects consumers by enforcing the District of Columbia real estate license law.

The Board consists of five members appointed by the Mayor. Three members are real estate appraisers licensed in the District, one is a real estate broker licensed in the District, and one is a consumer member. Three members of the Board constitute a quorum.

The Board meets on the third Wednesday each month at 10:00 AM. You can access the calendar at OPENDC