What is a Home Appraisal? All You Need to Know

Table of Contents

Is a home appraisal required?
Home appraisal vs. home inspection
How do home appraisals work?
What do appraisers look for?
How to prepare for an appraisal
How much do home appraisals cost?
Who does home appraisals?
How long do home appraisals take
What happens after the appraisal?

<p>Between the buyer, seller, and lender, there are countless steps to take before a real estate deal can close.</p>  <p>Every party involved in the home-buying process wants to know that they’re getting the best deal possible. However, pricing a home can get tricky. One of the easiest ways to keep the process as fair as possible is to have the home appraised.</p> <div class="lh-featured-snippet"> <h2>What is a home appraisal?</h2> <p><span>A home appraisal is a process during which a licensed appraiser evaluates different elements of a property to determine its fair market value. An appraisal is ordered by a mortgage lender.</span></p> </div> <p>In addition to traditional appraisals, <a href="https://www.g2.com/categories/property-management" rel="noopener" target="_blank">property management software </a>can help streamline the valuation process by providing data analytics and historical performance metrics for similar properties in the area. </p> <p>An appraisal can make or break a deal, so it’s important to familiarize yourself with the process before jumping in. In this article, we’ll cover the home appraisal process more in-depth and share what to expect before, during, and after.</p> <a id="is-a-home-appraisal-required" data-hs-anchor="true"></a> <h2>Is a home appraisal required?</h2> <p>The short answer is no. If the home is being paid for in cash without a loan, then an appraisal is not required. However, most people purchase their homes with the help of a mortgage. Lenders will always require that a buyer get a home appraised to make sure the property is worth the amount requested in the loan. That means that even though the buyer and seller may have agreed on a sale price, it’s not final just yet.</p> <p>The lender will choose the appraiser, the buyer is responsible for footing the bill, and the seller just has to make sure the appraiser can access their home. The appraisal will usually take place while the property is in <a href="/escrow" rel="noopener" target="_blank">escrow.</a></p> <a id="home-appraisal-vs-home-inspection" data-hs-anchor="true"></a> <h2>Home appraisal vs. home inspection</h2> <p>Although they may be similar, a home appraisal and inspection are not the same thing. As mentioned previously, an appraisal is required by a lender to protect their <a href="/real-estate-investing" rel="noopener" target="_blank">investments</a>. Its purpose is to determine the value of the property before finalizing a mortgage loan.</p> <p>A <a href="https://www.g2.com/glossary/home-inspections-definition" rel="noopener" target="_blank">home inspection</a> is ordered by the prospective homebuyer. During this process, an inspector will examine the physical condition of a property while paying close attention to its internal systems, such as plumbing, air conditioning, etc. This helps the buyer identify any potential problems or maintenance issues with the property. They can then use this information to negotiate a final price with the seller. While an inspection is highly recommended, it’s not required.</p> <a id="how-do-home-appraisals-work" data-hs-anchor="true"></a> <h2>How do home appraisals work?</h2> <p>Appraisals <span style="box-sizing: border-box; margin: 0px; padding: 0px;">protect the buyer and lender during the home-buying process. Before finalizing a <a href="/what-is-a-mortgage" target="_blank" style="font-weight: bold;" rel="noopener">mortgage</a>, a lender will require that the buyer get the property appraised</span> to ensure that the home is worth the amount the buyer is seeking to borrow from the bank.</p> <p>By bringing in a third party to evaluate the property, both the buyer and lender can be sure that they’re getting an objective opinion. Appraisers are licensed experts who have no connection to the deal – it’s their job to be independent and unbiased. They will look at the physical condition of the property as well as consider outside factors such as market trends and the sale prices of comparable homes in the area. We’ll touch more on this later.</p> <a id="what-do-appraisers-look-for" data-hs-anchor="true"></a> <h2>What do appraisers look for?</h2> <p>The appraisal industry is highly regulated. Appraisers are licensed at the state level and follow strict guidelines when evaluating properties. A standard appraisal takes a little under an hour to complete.</p> <p>In general, appraisers will examine the following elements of a property:</p> <h3>1. Location</h3> <p>In <a href="/what-is-real-estate" rel="noopener" target="_blank">real estate</a>, location is everything. The neighborhood that a property is located in will have a big impact on its value. In addition to geographic location, appraisers will take into account whether or not the home has a view of a landscape or if it’s near certain undesirable landmarks. A home that’s near a busy highway or railroad track may be valued lower.</p> <h3>2. Size</h3> <p>A bigger home will appraise for a higher value. Appraisers will look at the square footage of the home in addition to the acreage of the overall plot of land. They will also consider the functionality of the home’s size by looking at the number of bedrooms and full or half bathrooms. The garage and driveway will have an impact here, too.</p> <h3>3. Physical condition</h3> <p>Appraisers will examine both the interior and exterior features of a home. This includes any observable features such as foundation, walls, floors, and the materials used to build them. They will take note of any general maintenance flaws, such as broken door handles or leaky faucets. If a home has a basement, attic, or crawl space, this will also be considered.</p> <div class="lh-callout"> <p><strong>Tip:</strong> An appraiser isn’t looking at things like furniture, decor, or cleanliness. However, chipped paint or holes in the wall will be considered.</p> </div> <h3>4. Neighborhood comparables</h3> <p>Neighborhood comparables, often called “comps” in industry speak, are the sale prices of comparable homes in the area. An appraiser looks at this data to ensure that the home they’re currently appraising is comparable to other nearby properties with similar characteristics.</p> <a id="how-to-prepare-for-an-appraisal" data-hs-anchor="true"></a> <h2>How to prepare for an appraisal</h2> <p>Every homeowner wants their property to have a high market value. After all, a high appraisal is just one step closer to getting the deal done.</p> <p>There are several things that sellers can do to boost the value of their home before the appraisal to make sure everything runs smoothly:</p> <ul> <li>Gather and organize receipts of past <a href="https://nedstevens.com/" rel="noopener" target="_blank">home improvement projects</a></li> <li>Take care of any minor repairs such as chipped paint or stained flooring</li> <li>Declutter and organize belongings</li> <li>Tidy up the exterior of the home. This includes landscaping, driveway, and any possible damage to the gutters or garage</li> <li>Although cleanliness won’t impact the value of the home, cleaning up before the appraisal is a best practice to follow</li> </ul> <p>If you’re a homeowner who wants to prepare for an upcoming visit from an appraiser, use this free checklist to make sure you cover all your bases.</p> <div class="lh-callout"> <p><strong>Tip:</strong><span style="font-weight: normal;"> Download our comprehensive <a href="https://learn.g2crowd.com/hubfs/home%20appraisal%20checklist.pdf" rel="noopener" target="_blank" style="font-weight: bold;">home appraisal checklist</a> to ensure you’re fully prepared for your upcoming appraisal. </span></p> </div> <a id="how-much-do-home-appraisals-cost" data-hs-anchor="true"></a> <h2>How much do home appraisals cost? </h2> <p>The cost associated with a home appraisal varies but typically falls between $300 and $800.</p> <p>For luxury properties or homes with more than one unit, costs can exceed this average range. This fee is usually included as part of other closing costs that buyers should anticipate.<br><br>Factors affecting home appraisal costs:</p> <ul> <li><strong>Property size:</strong> Larger homes generally require more time and effort to appraise, increasing costs.</li> <li><strong>Location:</strong> Appraisal fees can vary by region; urban areas may have higher costs due to demand and competition.</li> <li><strong>Property type: </strong>Unique properties, such as those with unusual features or multiple units, may incur higher appraisal fees.</li> <li><strong>Market conditions:  </strong>In a rapidly changing market, appraisers may charge more to account for increased demand for their services.</li> <li><strong>Complexity of the appraisal: </strong>Homes that need specialized appraisals (e.g., historical properties or those with extensive renovations) can cost more due to the added expertise required.</li> <li><strong>Turnaround time: </strong>Expedited appraisals often come with a premium, increasing the overall cost.</li> </ul> <a id="who-does-home-appraisals" data-hs-anchor="true"></a> <h2>Who does home appraisals?</h2> <p>Home appraisals are typically conducted by licensed or certified appraisers. They assess a property's value based on various factors. </p> <p>Skills needed for home appraisers:</p> <ul> <li><strong><a href="https://www.g2.com/articles/what-is-data-analytics" rel="noopener" target="_blank">Data analytics</a>:  </strong>Appraisers must analyze data and trends to determine property values accurately.</li> <li><strong>Attention to detail: </strong>A thorough examination of the property and its features is critical for an accurate assessment.</li> <li><strong>Knowledge of real estate markets: </strong>Understanding local market conditions and trends is essential for providing informed valuations.</li> <li><strong>Communication skills: </strong>Appraisers must convey their findings clearly in written reports and communicate effectively with clients and stakeholders.</li> </ul> <p>Appraisers often rely on various tools and resources to aid their evaluations. This may include access to property databases, <a href="https://www.g2.com/categories/market-intelligence" rel="noopener" target="_blank">market intelligence software</a>, and industry publications that provide up-to-date information on property values and trends.</p> <p>Continuing education and training are also essential for staying informed about changing regulations and appraisal techniques.</p> <a id="how-long-do-home-appraisals-take" data-hs-anchor="true"></a> <h2>How long do home appraisals take</h2> <p>Home appraisals typically take between 30 minutes to a few hours to complete on-site, depending on the size and complexity of the property.</p> <p>After the inspection, the entire appraisal process usually takes one to two weeks for the appraiser to finalize the report and deliver it to the lender or client.</p> <p>What to do if there are delays:</p> <ul> <li><strong>Stay informed: </strong>Contact your lender or the appraiser for updates on the appraisal status to understand the reason for the delay.</li> <li><strong>Plan ahead: </strong>Delays may affect your overall timeline for closing, so communicate with all parties involved in the transaction to adjust expectations accordingly.</li> <li><strong>Be patient:</strong> While delays can be frustrating, ensuring a thorough and accurate appraisal is crucial for making informed decisions regarding the property's value.</li> </ul> <a id="what-happens-after-the-appraisal" data-hs-anchor="true"></a> <h2>What happens after the appraisal?</h2> <p>After an appraisal is complete, it will be reviewed by the lender. If the appraisal comes back low, the deal could be in jeopardy. The lender isn’t going to loan out more money than the home is appraised at or worth. The buyer can either make up the difference with their own money or go back to the drawing board and try to re-negotiate with the seller.</p> <div class="lh-callout"> <p><strong>Tip:</strong> Including an appraisal contingency in the purchase agreement can save the buyer from a low appraisal. With a contingency, if the appraisal comes out low, the buyer can walk away from the deal altogether.</p> </div> <p>If the appraisal comes back at or above the purchase price, this is good news. It doesn’t necessarily mean the buyer is getting a good deal, but it’s one step closer to closing on the property.</p> <h3>Seal the deal</h3> <p>There are many moving parts in the home-buying process. When all parties have a lot at stake, everyone is looking out for themselves and their assets. A home appraisal is just one important step in making sure the playing field is fair and even. If all goes well, it will be a win-win-win for the buyer, seller, and lender.</p> <p style="font-weight: bold;">Interested in learning more about maximizing your property’s value? Learn more about <a href="https://www.g2.com/articles/what-is-property-management" rel="noopener" target="_blank">property management</a>.</p> <p><em>This article was originally published in 2019. It has been updated with new information.</em></p>

Izabelle Hundrev

Izabelle is a Partner Marketing Specialist at InStride and a former content specialist at G2. Outside of work, she is passionate about all things pop culture, food, and travel. (she/her/hers)

What is a Home Appraisal? All You Need to Know

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