What to know about the home appraisal process
Confirming a home’s value is an important step before you complete the buying, selling or refinancing process
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A home appraisal is an essential part of the home-buying process. It’s important to understand the ins and outs of an appraisal before you make any financial moves.
What is a home appraisal?
A home appraisal is a trained professional’s unbiased assessment of the fair market value of the property. Knowing how much a home is really worth assures the lender that it is lending the borrower the right amount of financing.
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Who is an appraiser?
An appraiser is a trained and licensed real estate professional who is regulated by state appraisal boards and must follow federal, state and local laws and regulations. Each appraiser is required to remain independent and objective—meaning they can’t be influenced by a buyer, seller, realtor or lender.
Who orders and pays for the appraisal?
Your lender orders the appraisal to be performed by a licensed appraiser. However, the borrower is typically required to pay for it. The cost appears on the Loan Estimate after you apply for a loan and is later included on the Closing Disclosure as part of the closing costs.
What determines a home’s value?
When estimating a property’s value, an appraiser evaluates many things. Here are some common considerations:
Comparable properties
Like a real estate agent, an appraiser looks at recent sales of homes, especially those that are similar in size and location to the home being purchased. Their sale prices are usually the most important factor.
Condition
An appraiser factors in a home’s general condition, age and quality of materials used to build it.
Location
An appraiser considers the location of the home, including views or other remarkable features, as well as school district ratings and proximity to public transportation.
Lot size
An appraiser will assess the lot size and compare it to similar lots in the neighborhood. An appraiser will also assess the square footage and features of the home, including the number of bedrooms and baths.
Upgrades and improvements
If a home has had major structural improvements such as additions and remodeled rooms, the appraiser factors that in, too.
Amenities
Special features such as swimming pools, wood flooring or an in-law suite can also impact the home value.
What if the home appraisal is lower than the purchase price?
Sometimes a home’s appraised value is different than the agreed-upon purchase price. A lower-than-expected appraisal could affect the sale of a home because the mortgage lender will not lend more than the appraised value. If this happens, it’s important to know the steps to dispute a home appraisal and your options for moving forward with the sale. If you don’t agree with an appraisal, you can ask the lender to revisit the assessment—called a Reconsideration of Value (ROV).
Know your rights
If you think you received an unfair home appraisal, you can file a complaint with your state appraisal board, the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development.
What’s the difference between an appraisal and an inspection?
Appraisals
- They are required and requested by lenders
- Report the characteristics of the home
- Focus on the fair market value of the property
- Compare the home’s features and condition with other recently sold homes
Inspections
- Generally, they aren’t required by lenders
- Provide a thorough assessment of the home’s condition
- Typically produce an itemized report of potential repairs or problems with the property
- Based on the findings, a buyer may want to renegotiate to determine who will pay for repair costs
5 tips to prep for your home appraisal
If you’re selling your home or refinancing your mortgage, here are some simple appraisal tips that could increase the value of your home.
 | Gather important documents like land surveys for the appraiser. |
 | Keep a list of home improvements (and receipts) handy. |
 | Improve curb appeal with professional landscaping and a clear yard. |
 | Make minor repairs, such as touching up chipped paint or tightening loose doorknobs. |
 | Make sure all lights, plumbing and safety equipment like smoke alarms work. |
