Home appraisal: Important things to know

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A home appraisal is an estimate of a home’s market value and is conducted by a licensed professional.
Home appraisals are typically required when buying, selling or refinancing a home to determine its value.
The cost of a home appraisal varies but usually ranges between $314–$423, depending on the property’s location and complexity.

Whether you’re buying, refinancing or selling a house, a home appraisal is a crucial part of the financing journey. A home appraisal is used to determine the estimated value of a home, which can significantly impact the outcome of your transaction.

The appraisal process may seem daunting at first, but we’re here to help. In this guide, we’ll cover what you may need to know about home appraisals, including how they work, what factors are considered, the costs involved and what to expect during the process.

What is a home appraisal and why is it important?

A home appraisal is an estimate of a home’s market value, as determined by a licensed appraiser doing an in-depth analysis. It’s important to remember that the appraised amount isn’t the sale or asking price of a home—it’s the estimated value of what the home may be worth based on a variety of factors. This estimated value is critical for buyers and sellers to ensure the sale price of the property reflects its true value, protecting both from overpaying or underselling, respectively.

For lenders, appraisals provide a safeguard by confirming that the property's value is sufficient to cover the loan amount, minimizing financial risk. If you’re unable to repay your loan, the home serves as collateral. And, if the home appraises under the amount you plan to finance, this can create an issue for both you and the lender. The lender won’t be able to recoup the cost of your loan while you might end up underwater on your mortgage.

How does the home appraisal process work?

Understanding the home appraisal process can help you prepare and set the right expectations. Here’s a step-by-step look into what happens during an appraisal:

Schedule the appraisal: Once an offer is accepted or a refinance is initiated, the lender will arrange for a home appraisal. The appraiser is an independent third party that will ensure an unbiased evaluation.
On-site inspection of the property: The appraiser will visit the property, conduct a thorough inspection and evaluate the home’s condition, size, layout and other key features. This will include both the interior and exterior of the house.
Review of comparable properties: Appraisers will analyze recent sales of similar properties in the area, also known as “comps,” to get a better understanding of current market trends and determine a fair market value for the property.
Completing the appraisal report: After the inspection and analysis, the appraiser compiles their findings into an appraisal report, which includes the estimated home value and a detailed description of how it was determined.
Finalize the appraisal: Once the above steps are completed, the findings of the appraisal are sent to both the lender and the buyer. If the appraised value aligns with the sale price, the transaction can move forward to the mortgage underwriting phase. If it’s lower, it may require renegotiation or additional actions from the buyer, lender or seller.

How much does a home appraisal cost?

The cost of a home appraisal varies depending on location, size and complexity. On average, appraisal fees range from about $314–$423 but can be higher for more complex homes.home-appraisal-cost-2024 The fees are typically paid by the buyer in a purchase transaction or by the homeowner in a refinancing scenario.

Types of home appraisals

Different situations may call for different types of appraisals. Understanding what they are can help you choose the right one for your needs:

Full appraisal

A full appraisal is a comprehensive evaluation, where the appraiser conducts an in-depth inspection of the property, both inside and out, and reviews market comps. This is the most common type and provides the most thorough analysis.

Drive-by appraisal

A drive-by appraisal is a less detailed evaluation, where the appraiser only inspects the exterior of the property and uses comp data to estimate the home’s value. This type is often used for refinancing.

Desktop appraisal

A desktop or “online appraisal” is completed using publicly available data, comp sales and market trends without a physical inspection. This is often used in situations where a rapid valuation is needed, such as for refinancing.

What do home appraisers look for?

Many factors affect the value of a home. Some items an appraiser will likely review include:

The overall condition
Location
Size of the home
Safety features
Plumbing and electrical systems
Home updates
Nearby sales
Any damages
Material the home is made of
Indoor and outdoor amenities

Appraisers will usually start with the overall condition of the home, looking for any visible damage or wear and tear that could impact the property's appeal. The location is another critical factor, with the quality of the local school district, proximity to amenities and neighborhood desirability all influencing the property value. Size matters, too—both the total square footage and the efficiency of the floor plan.

Safety features, like smoke detectors and secure railings, are taken into account, as are the condition and functionality of the plumbing and electrical systems. Recent home updates, such as modern kitchens, updated bathrooms and energy-efficient appliances, can also significantly increase the home's value. Lastly, the quality of construction materials and the presence of desirable amenities—both indoors and outdoors—such as smart home technology, fireplaces or well-maintained landscaping, can play a role in the appraisal process as well.

By carefully examining these factors, appraisers can provide an accurate estimate of a home's market value. Understanding what appraisers look for can help you prepare for the appraisal process and potentially increase your home's appraisal.

Home appraisal tips for buyers, sellers and refinancers

Here are some practical, tailored tips for buyers, sellers and refinancers to help them navigate the process as efficiently and effectively as possible:

Tips for buyers

If the home’s appraised value matches the agreed purchase price, the transaction is usually straightforward. If the appraised value comes back below the agreed purchase price, then as a buyer, you may need to reconsider your options, as mortgage lenders typically won’t let you borrow more than what a home is estimated to be worth.

If you’re a buyer, consider doing the following to help streamline the process:

Work with a real estate professional who understands your local market.
Review recent comp sales to gauge expected market value.
Avoid feeling pressured to offer above the asking price, especially if you think the. appraisal will be lower than expected.
Be prepared to negotiate or walk away if the appraisal is lower than the offer.

Tips for sellers

When you’re selling your home, having a good understanding of the property value helps you understand your home equity, which is the difference between the appraised value of the property and any outstanding mortgage balance. Knowing this, if the appraisal comes in lower than expected, you might need to adjust your strategy. You could lower your asking price or ask that the buyer make up the difference.

If you’re a seller, you can:

Ensure the home is clean and accessible for the appraiser.
Highlight or improve exterior features to make a good first impression.
Provide a list of any recent upgrades and accompany the appraiser to point them out.
Have a good understanding of the local market and set realistic expectations (e.g., consider recent foreclosures or other market shifts that could impact your home’s overall market value).

Tips for refinancers

If you’re refinancing a home, your lender will likely require an appraisal. If the appraised value is below what is expected, it might limit your refinancing options. The lender may also deny your application altogether. However, just like with any purchase, you can request a reconsideration of value if the appraisal comes in lower.

If you’re refinancing, doing the following can help make the process easier:

Maintain the home’s appearance and address any minor repairs.
Provide a record of regular maintenance history, such as HVAC servicing and roof inspections.
Point out special or unique features, and make sure they’re accessible and showcased.
Consider refinancing options that don’t require an appraisal, like certain FHA or VA loans.

In summary

In short, a home appraisal is a vital step in the home financing process, providing an unbiased estimate of a property’s market value. By having a good understanding of what factors appraisers look for, you can take proactive steps to ensure a smooth and successful transaction. Whether you’re a buyer, seller or looking to refinance, being prepared can make a significant difference.

Don’t navigate home financing alone. Apply for a mortgage loan today and get support from our expert team.

Home appraisal FAQs

How long does an appraisal take?

A typical home appraisal can take up to a few hours, depending on the size and condition of the property. After the on-site inspection, the appraiser will complete the appraisal report. The time it takes them for this portion will vary as well, as they need to analyze comparable sales data and market conditions.

What are the qualifications of a home appraiser?

Home appraisers must meet specific educational and licensing requirements, which vary by state. Generally, appraisers need to complete coursework, gain supervised experience and pass a state exam. They must also adhere to the Uniform Standards of Professional Appraisal Practice (USPAP) to ensure accurate and ethical appraisals.

Can a home appraisal be contested or challenged?

Yes. If you disagree with the appraised value of your property, you can request a reconsideration of value. This involves providing additional information or recent comparable sales that the appraiser may have overlooked. It’s important to present concrete evidence to support your case for a different valuation.

What should you not say to a home appraiser?

When you’re getting your property appraised, try to avoid making statements that could be seen as trying to influence the appraiser’s judgment (e.g., how much you’re willing to pay or sell for). It’s best to provide factual information about the property and any recent upgrades to ensure the appraiser can conduct their evaluation independently.