Understanding Home Appraisals

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Real Estate

A home appraisal is a crucial step in determining the value of a property, especially if you’re planning to buy or sell a home. It helps to determine if the asking price is reasonable or if it’s overpriced. The process involves an expert opinion from a certified, state-licensed professional who assesses the value of the property. This article will explain the methods used by appraisers to determine property value and what’s included in the appraisal report. It will also debunk some common myths about home appraisals, such as whether dirty dishes in the sink or a wet basement can affect the appraisal value.

When you apply for a mortgage, your lender will require the property to be appraised by one of their approved appraisers. The cost of the appraisal, typically around $300, is usually paid by the borrower as part of the mortgage costs at the time of closing. The appraiser uses two primary methods for residential property: the sales comparison approach and the cost approach.

Sales Comparison Approach

The sales comparison approach involves analyzing three or four similar homes that have sold in the area, known as comparables or comps. The appraiser considers specific components such as lot size, square footage, style, age of the house, and other features like garages and fireplaces to determine the value of the property.

The sales comparison approach is a common method used by appraisers to determine the value of a home. By analyzing comparable properties, the appraiser can determine a reasonable value for the home in question. It’s important to note that a home appraisal is not the same as a home inspection, which is a separate process that assesses the condition of the property and identifies potential problems.

The cost approach is commonly used for new properties and is based on the cost to reproduce the structure on the property if it were destroyed. The appraiser then considers land value and depreciation to determine the property’s worth. The appraiser gathers information from various sources, including a physical inspection of the property, county courthouse records, and recent reports from the local real estate multiple listing service. The appraisal report includes a detailed explanation of the property’s value, size, condition, and any improvements made. Additionally, it includes information about the surrounding area and recent market trends, along with maps, photographs, and sketches. The appraisal figure determines the loan amount that can be obtained to buy the property. Contrary to popular belief, general tidiness and curb appeal do not influence the appraisal amount. If the appraisal value is lower than the asking price, it may signal that the property is overpriced, and the appraiser may be willing to adjust the appraisal if repairs or maintenance are made.

If you are not satisfied with the first appraisal of a property, you can opt for a second one from an appraiser recognized by the lending institution. This step is advisable especially if the first appraiser is inexperienced or not familiar with the area where the property is located. In some cases, a second appraisal might reveal mistakes made by the first appraiser. If you still believe that the appraisal does not accurately represent the property’s value and the appraiser is not receptive to your concerns, you can file a complaint with your state’s licensing agency for appraisers. However, from the lender’s perspective, the mortgage transaction cannot proceed until a solution is found. This could involve the seller lowering the asking price or carrying a second mortgage. Alternatively, the buyer could increase their down payment or the parties involved could negotiate a compromise. If the negotiations fail, and the appraisal remains far below what the bank is willing to finance, the transaction has to be canceled. Typically, the purchasing contract includes a loan contingency that allows the buyer to cancel the contract and receive their deposit if they cannot qualify to buy the property at the agreed terms. A home appraisal is an essential part of the home-buying process that provides protection for all parties involved. However, the housing collapse of 2007 revealed that some lenders were pressuring appraisers to inflate home values to make more loans available. To prevent this, Fannie Mae and Freddie Mac announced in 2009 that they would only buy mortgages from lenders that use independent appraisers who adhere to a Home Valuation Code of Conduct.

Understanding Home Appraisals

A home appraisal is a process where a certified professional determines the value of a property. The appraiser inspects the property inside and out and gathers information from various sources to create the appraisal report. The report includes the total value of the home, land, and any permanent structures. This figure also determines the loan amount that can be obtained to buy the property.

Many people turn to online tools like Zillow for home values, but these appraisals are not entirely accurate since they don’t consider all market intricacies. However, they can be helpful for getting a ballpark idea of a property’s value.

There is a common myth that a messy house can affect the appraisal amount. While overall maintenance of the home and surrounding property is a factor, details such as dirty dishes in the sink or an unmowed lawn do not influence the appraisal.

For more information on home appraisals, check out the related articles on How Buying a House Works, How Mortgages Work, and How Banks Work. You can also find an appraisal expert in your area or explore Freddie Mac’s Online Guide to the Homebuying Process and the Small Residential Income Property Appraisal Report.

Sources include the American Society of Appraisers, the Appraisal Foundation, the Illinois Business Law Journal, the Office of Federal Housing Enterprise Oversight, Real Estate.com, the U.S. Department of Housing and Urban Development, and Wilmington Trust.


1. What is a home appraisal?

A home appraisal is a process of determining the value of a property. It is an unbiased estimate of the worth of a home, based on various factors such as location, size, features, condition, and recent sales of comparable properties in the area. Appraisals are typically conducted by licensed professionals who have undergone specialized training and education in the field of real estate appraisals.

2. Why do I need a home appraisal?

Home appraisals are usually required by lenders when you apply for a mortgage to buy or refinance a home. The appraisal helps the lender determine whether the property is worth the amount of money you are asking to borrow. If the appraisal comes in lower than expected, the lender may offer you a lower loan amount or reject your application altogether. Appraisals are also important for homeowners who want to sell their property, as they can help determine a fair asking price.

3. How long does a home appraisal take?

The length of a home appraisal can vary depending on a number of factors, such as the size and complexity of the property, the availability of comparable sales data, and the appraiser’s workload. In general, a typical home appraisal can take anywhere from a few hours to several days to complete. However, most appraisals are completed within a week or less.

4. What do appraisers look for when appraising a home?

Appraisers consider a variety of factors when determining a home’s value, including its location, size, age, condition, features, and recent sales of comparable properties in the area. They will also take into account any upgrades or renovations that have been made to the property, as well as any potential issues such as damage or structural problems. Appraisers typically use a combination of data analysis, site visits, and research to arrive at a final appraisal value.

5. How much does a home appraisal cost?

The cost of a home appraisal can vary depending on a number of factors, such as the location and size of the property, the complexity of the appraisal, and the appraiser’s experience and qualifications. In general, you can expect to pay anywhere from $300 to $500 for a standard home appraisal. However, prices can range from as low as $200 to as high as $1,000 or more, depending on the circumstances.

6. Can I do my own home appraisal?

While it is possible to conduct your own home appraisal, it is generally not recommended. Home appraisals require specialized knowledge and expertise, as well as access to a wide range of data sources and tools. Additionally, appraisals must be conducted by licensed professionals in order to be recognized by lenders or other parties. Attempting to do your own appraisal could result in inaccurate valuations or other issues that could impact your financial goals.

7. What happens if the appraisal comes in lower than expected?

If the appraisal comes in lower than expected, it can create several challenges for homebuyers or homeowners. For example, if you are applying for a mortgage, the lender may offer you a lower loan amount than you had hoped for, or may require you to put down a larger down payment in order to secure the loan. If you are selling your home, a lower appraisal value may mean that you need to lower your asking price or negotiate with potential buyers. In some cases, you may be able to challenge the appraisal if you believe it contains errors or inaccuracies.

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