Takeaways
- An appraisal is a professional opinion on your home’s market value.
- Appraisals include in-person inspections, comparisons to comparable homes, assessment of the home's condition, and more.
- Lenders require a home appraisal for buying, selling, or refinancing homes.
- Appraisals below the purchase price can limit a lender’s ability to provide financing to help purchase the home.
- According to a National Association of Realtors survey, the national median appraisal cost was $500 in 2023.
What Is a Home Appraisal?
A home appraisal is conducted when a state-licensed real estate professional assesses a property’s value.[1] The appraised professional is educated and skilled in evaluating different aspects of your home, property condition, and value of improvements to determine its overall worth.
Getting an appraisal is crucial in real estate transactions because it provides both the buyer and seller with an unbiased estimate of the home's value. An appraisal assists buyers, sellers, and lenders to make informed transaction decisions.
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Appraisals are needed whenever you buy, refinance, or sell a home. The purpose of getting an appraisal is to ensure the property's value is aligned with the mortgage, which protects lenders from lending more than the property is worth. Otherwise, lenders would issue underwater mortgages, where the loan's value is worth more than the house.
A trained appraiser inspects all aspects of the property’s condition, location, recent improvements, recently sold comparable properties, and more. An appraiser issues a final report that provides a detailed breakdown of their assessment and issues an estimate of the property’s value.
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What a Appraiser Examines
An appraisal is a comprehensive property evaluation, meaning appraisers must consider many variables. The appraiser finds the house, assesses the property, and analyzes recent transactions of similar homes in the area, known colloquially as “comps” or comparable sales. Here are the variables an appraiser analyzes:
1. Home Condition
An appraiser's primary consideration is the overall condition of your home. As part of their assessment, appraisers will visit your house to inspect its structural integrity, including the foundation, walls, roof, windows, and doors, looking for signs of general wear and tear. Additionally, they will check the total square footage, quality of building materials, and architectural style.
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They will walk the outside of your house and tour the inside, examining the condition of the critical systems. At a minimum, appraisers will look at your plumbing, electrical, and HVAC equipment. They will look for signs of excessive aging or wear and tear that may impact the home's value.
The appraiser may also evaluate the property's general maintenance, upkeep, and landscaping. Well-maintained homes with curb appeal and no major issues are more likely to be appraised at a higher value than similar homes that need significant updates.
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Home Conditions Influencing an Appraiser:
The attention and skill of the appraiser are vital in ensuring the appraisal reflects the reality of the home’s condition. The appraiser will analyze your home's:
- Foundation
- Roof, Doors, and Windows
- HVAC Systems
- Plumbing Systems
- Basement Conditions
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2. Home Improvements
Another major aspect of an appraisal is the degree to which the home has been improved or updated. Upgrades and renovations raise a home's value by enhancing its aesthetics, functionality, and curb appeal.
The most common improvements are updated kitchens and bathrooms, new flooring or carpeting, modern fixtures or appliances, and added living spaces such as finished basements or additions.
Appraisers consider not only what updates or improvements have been made but also the quality of the upgrades. For example, they examine the materials, craftsmanship, and design used in the improvements. Homeowners who make quality home investments generally see that added value reflected in property appraisals.
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One thing to remember is that not all improvements are guaranteed to add value. Overly personalized or unconventional improvements are less likely to appeal to potential buyers.
For example, a shag carpet in the living room might not appeal to a buyer with a modern sense of interior decorating. New homebuyers might see over-personalization as an added renovation cost.
The appraiser also considered energy-efficient upgrades like solar panels or high-efficiency windows, which can add value by reducing utility costs and HVAC wear and tear. Both are highlights for potential buyers.
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Home Improvements Influencing an Appraiser:
Not all improvements are equal, but those that offer reasons for the appraiser to give your house higher marks will be noted. Appraisers watch out for:
- Major Improvements
- New Appliances
- Built In Upgrades
- Appealing Renovations
- Square Footage Improvements
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3. House Comps and Recent Transactions
Recent sales of similar properties in your area, even your neighborhood, are known as “comps,” or comparable transactions. House comps allow appraisers to compare one home to another in similar size, style, age, and amenities. This apples-to-apples comparison creates a baseline for the property value in current market conditions.
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The appraiser also synthesizes market trends and trajectories. They may find related trends in selling price, time to sell, or relative value of comparable homes. An in-depth market analysis helps build more context around the appraiser’s final valuation. Ultimately, the estimated value should be close to what potential buyers are willing to pay.
Recent Transactions Influencing an Appraiser:
Part of an appraiser’s market value assessment includes a thorough search and evaluation of recently sold homes of similar ilk. Here, appraisers look at:
- Sales in the last several months
- Homes of similar square footage
- Architectural Similarities
- Lot Size and House Size
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How Much Does an Appraisal Cost?
A recent National Association of Realtors survey found the median appraisal cost to be $500.[2] However, the price of a home appraisal varies considerably based on a handful of variables, such as the home’s size, complexity, and appraisal requirements.
The average single-family home will cost several hundred dollars to appraise. Larger, more involved, or more complex properties will command appraisal fees of more than a thousand dollars.
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Additionally, geographic location weighs significantly into the appraisal expense, and appraisals in large cities tend to cost more than those in rural areas. The purpose of the appraisal can also impact the price. For example, appraisals needed for legal disputes may command higher fees than those required for simple mortgage refinancing.
Who Pays for an Appraisal?
In most cases, the responsibility for paying for a home appraisal falls on the buyer. When you are in the market to purchase a new home, your lender will require an appraisal of the house for which you want to put in an offer.
The appraisal helps ensure that the property value matches the loan amount so that the loan's collateral aligns with the loan value. Since getting an appraisal is a standard part of the mortgage approval process, buyers usually cover the cost. Although exceptions apply, a homebuyer should expect to incur these costs.
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There are situations where the seller may offer to pay the appraisal cost or agree to deduct it from the price of the home. This is true more often in competitive markets where a seller wants to attract serious buyers and keep their attention. Also, in some cases, like legal proceedings, the parties involved may need to negotiate or even split the cost.
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How Long Does an Appraisal Take?
The time it takes to receive the final appraisal report varies. Most appraisers send it back to you after a couple of days, but sometimes, it can take a week or two.
The on-site visit usually takes a few hours or less. After the inspection, the data must be analyzed and compared to current market transactions.
The competitiveness of the real estate market, the appraiser’s schedule, the complexity of the property, and the demand for appraisals all impact the time it takes to assemble the final report.
Smart Summary
Buying your first home can be full of unexpected costs. Even for the seasoned home purchaser, amnesia about the process can leave you fuzzy on details like getting a pre-approval letter, remembering why you need an escrow account, what earnest money is, and determining how much to put down as a down payment. Navigating the homebuying process is challenging. Getting a great buyer’s agent can help you during the process.
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(1) Officer of the Comptroller of the Currency. Appraisals. Last Accessed January 14, 2025.
(2) National Association of Realtors. 2023 Appraisal Survey. Last Accessed January 14, 2025.
