What is a Home Appraisal? Everything You Need to Know About the Home Appraisal Process

There are many steps to the homebuying and selling processes – and one of the common steps is a home appraisal. A home appraisal determines the value of a home and is important for both buyers and sellers. But if you’re new to the process, you may have lots of questions about it.

In this Redfin article, we’ll outline what a home appraisal is, why it’s important, and what you need to know before having a home appraisal. Whether you’re buying a home in Atlanta, GA, or selling your house in Madison, WI, these are the most common questions and answers about home appraisals – and the next steps you need to take when buying or selling your home.

Key takeaways

• Home appraisals are unbiased determinations of a home’s fair market value.
• The appraisal can take a few hours to complete, but up to 10 days to receive the report. 
• If the home’s value is lower than the purchase price, buyers may be able to back out of the transaction. 

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What is a home appraisal?

A home appraisal is an unbiased professional opinion of a home’s market value. During the homebuying and selling process, a home appraisal is used to determine the home’s fair market value. This ensures that the home’s value is equal to or more than the mortgage loan amount. It is also used when refinancing a home. Lenders use home appraisals to make sure that they aren’t lending you more money than what the home is worth.

Who requests a home appraisal?

Once the buyer and seller have each signed the contract, the buyer’s real estate agent contacts the lender, who then books a certified home appraiser to evaluate the property. To ensure that the appraisal is objective, this appraiser must be a third party with no loyalty or ties of any kind to the lender, buyer, or seller. Their assignment is to state the facts about the home’s condition and value. Depending on how active the market is, the appraiser usually appraises the property within 48 hours of the lender’s request.

What is a home appraisal contingency?

A home appraisal contingency is a type of contingency that you may include when submitting your offer. Your mortgage lender may also suggest you include this contingency to protect yourself. An appraisal contingency allows you to back out of the home purchase if the home’s value is lower than the purchase price. 

Home appraisal contingencies are recommended but it may not always be the right choice – particularly if you’re buying the home in all-cash or it’s a seller’s market. However, if you’re buying your first home or don’t want to overspend, having an appraisal contingency can protect you against paying more for a home than it’s worth. 

Home appraisal vs home inspection

Home inspections are a much more in-depth evaluation of the home’s condition. With a home appraisal, the appraiser looks at the home itself to determine its overall value. They take into account unique features, any major defects, and comparable homes nearby. With a home inspection, the inspector will look for any problems such as outlets not working properly, exterior and interior damage, and HVAC systems, among other things. While appraisers determine the home’s value, a home inspector will check for damage and safety issues within the home.

How long does a home appraisal take?

Most appraisers can complete their report in 7 – 10 days. However, how long an appraisal takes can vary depending on how active the housing market is in your area. Appraisers are well aware that all parties in the transaction rely on them to do the walkthrough, complete the report, and deliver it to the lender as soon as possible. 

Two common situations can delay a home appraiser. If the appraiser is fully booked, it may take 4-5 days to get your house scheduled for a walkthrough. If the appraiser can’t get access to the property, it can delay the home loan process. Due to the homeowner’s schedules, it may take a day or two to coordinate a time to have the house open to a home appraiser.

Otherwise, the appraiser can usually get in, complete the walkthrough in a couple of hours, and submit their completed report within a week.

What do home appraisers look for?

The home appraisal process can be complicated and involves a variety of factors that help determine a home’s value. The appraiser will look at the property’s overall condition and safety. They’ll compare it to the state of similar properties that have sold recently in the same area. Data from comparable home sales in your area will help the appraiser factor in any improvements, upgrades, and amenities for the home you’re buying to determine fair market value.

Here are some of the things appraisers look at:

• Square footage – of the home and lot
• Number of bedrooms and bathrooms
• Location of the home, neighborhood, and nearby amenities
• Home’s layout
• Lot size and zoning restrictions
• Age and condition of the home, including the structure, roof, and foundation
• Type of construction materials, such as energy-efficient materials
• Additional amenities like a pool, fireplace, or balcony
• Condition of appliances and recent remodels
• Damage or hazards, like flood risk, that may decrease value
• The housing market, like recent sales and comparable homes

What hurts a home appraisal?

There are several factors that can hurt your home appraisal. However, some of the most common are: 

• Cluttered and unkept house
• Unfinished basement
• Outdated home systems
• Outdated kitchen
• Poor curb appeal

Types of house appraisals 

There are several types of appraisals, but they’re not all equal in value. In fact, some appraisals are not accepted by lenders. Here is an overview of some types of appraisals.

Uniform Residential Appraisal Report (URAR): Shortened to URAR, this is the most common type of appraisal – and one lender’s request. A certified appraiser evaluates the property based on various criteria to determine the home’s value.

Drive-by appraisal: Also called “restricted-use” and “short-form report,” this appraisal offers less information about the property. The appraiser typically looks at the outside of the home and relies on information from the owner to determine the home’s interior condition. 

Desktop appraisal: There are online appraisal sites that offer their services to owners. This can be a good option if you’re just curious about the home’s value, but it’s not usually accepted by lenders. 

Hybrid appraisal: A hybrid appraisal is similar to a drive-by appraisal, but includes additional information like photographs, measurements, and home inspection information to determine the home’s value. 

What’s in the home appraisal report?

Most home appraisers use a URAR. The appraisers will typically describe the home’s interior and exterior, the neighborhood, and list the prices of comparable homes nearby. Other things that must be included in the report are:

• Street map identifying the home and comparable properties
• Sketch of the exterior building
• Explanation describing how the square footage calculations 
• Photographs of the street, front, and back of the home
• Information like public lands records, public tax records, and sales data 

All of this information is used to explain the appraiser’s analysis and conclusion about the home’s fair market value. 

Home appraisal tips for homebuyers

A home appraisal is important to buyers because it provides proof that the property has been priced fairly. If the home appraisal comes in lower than their offer, you’ll have to renegotiate with the sellers for a reduction in the sale price or pay in cash since the lender won’t cover the full amount. Worst case, you may need to walk away from the home sale. There are some additional tips to keep in mind:

Don’t offer too much over asking: In some cases, like a seller’s market, you may need to offer more to compete with other buyers. However, it’s important not to offer too much more than the asking price, especially when applying for a mortgage. If the appraisal is too low, you may need to pay more upfront, renegotiate, or walk away from the sale. 

Have an appraisal contingency: Choosing to include an appraisal contingency allows you to back out of the home sale if the appraisal is too low.

Appeal the appraisal: Errors can happen, so if you think there’s a mistake in the appraisal, consider appealing it. Read through the appraisal report and check to see if there are any missing property details and whether the comparable properties are appropriate. If you see errors, speak with your lender to file the appeal process. 

Home appraisal tips for sellers

The home appraisal process is equally important to sellers, because it tells you how much your home is worth and if you priced your home competitively. If you priced your home too low, you may lose some of your home’s equity. On the other hand, if you priced your home too high, you may be faced with a buyer who is willing to walk away from the sale. There are several things you can do to prevent a low appraisal:

Provide an offer list and comparables: If your home had more than one offer, give the list of offers to the appraiser. This can show that you’ve priced the home accurately. Similarly, providing a list of comparable homes indicates what other homes are worth in the area.

Be present at the appraisal: You are allowed to be present at the appraisal, which gives you the opportunity to point out any home updates you’ve made over the years. 

Have a clean home: Small improvements, such as decluttering, replacing dim light bulbs, and covering up any chipped paint, can give the impression that your home is well cared for. While these changes don’t influence your home’s value, they can give the appraiser a good impression.

Home appraisal tips for refinancers

When refinancing your home, you want to have the highest appraisal you can get. A higher appraisal value means there’s more home equity available, which may give you more favorable loan terms or cash out. If your home appraisal is lower than expected it can make it difficult to refinance your home. However, if you’re refinancing with an FHA loan, you may be able to refinance without an appraisal. Here are some tips to consider when getting an appraisal:

Declutter and clean: A cluttered space can deter from your home’s features, so cleaning up your space can help the appraisal process. The appraiser can better see the home and see you’re not hiding any damage or issues. 

Ask for opinions: As a homeowner, you may not always see things that may be wrong in your home. Ask for outside opinions from family or friends who can identify any issues they see in your house. They may notice minor improvements you can make to help increase your home’s value.

Identify all upgrades and improvements: There are plenty of home improvements you may have made since buying your home that an appraiser may not know about. Did you get solar panels? Do you upgrade your windows to a more energy-efficient type? Did you finish the basement? Give the appraiser a list of all upgrades you’ve made to the home over the years. 

Keep in mind that these need to be new improvements or upgrades not maintenance. For example, replacing your air conditioning unit isn’t considered an upgrade. But if your home didn’t have air conditioning and you added it to the home, then it’s an upgrade. 

FAQs about the home appraisal process

Do I need a home appraisal?

If you’re buying a home with a mortgage or refinancing your current mortgage, your lender will request an appraisal. If you’re buying the home with all cash, a home appraisal isn’t necessary, but you can still consider getting one to ensure you’re not overpaying. 

How long does it take to close after a home appraisal?

The home appraisal process can take anywhere from 7 – 10 days to receive a completed report. As a result, it can take about 1 – 3 weeks, if not up to a month, to close after the appraisal. 

How much is a home appraisal and who pays for it?

The cost of a home appraisal depends on the size and location of the home. The average cost for a home appraisal is $200 – $600 but can range as high as $2,000 if the property is larger or in a rural area. While the mortgage lender typically requests the house appraisal, the home appraisal fee is added to the home loan’s closing costs, unless the homebuyer pays upfront. This fee is non-refundable. If the sale of the home falls through for any reason, the buyer loses that money.

What factors impact the home appraisal cost?

There are four main factors that impact the cost of a home appraisal – property type, home value, location, and type of mortgage. With property type, a two-bedroom home is going to cost less to appraise than a four-bedroom home with a pool, finished basement, and attic. Similarly, a home with a higher value will typically take longer to appraise than a smaller, less expensive home. 

The home’s location can impact appraisal costs. For example, if the home is far from the appraiser’s office, the cost may be more. Your mortgage can also influence the appraisal price, as FHA loans often require additional inspections, driving the cost up. 

How do I prepare for a home appraisal?

There are many things you can do to get your home ready for a home appraisal, including decluttering, cleaning, and making small repairs and upgrades. If your home is well-maintained and appears in overall good condition, the better chances you’ll have of a favorable appraisal. See more on how to prepare for a home appraisal.

Can you contest a low appraisal?

Yes, you can contest a low appraisal. You’ll need to provide a written rebuttal to your lender with detailed information you think the appraiser didn’t fully consider in valuing the home.

Do appraisals affect my mortgage?

The mortgage lender wants proof that the amount of the loan they’re approving and lending to the homebuyer does not exceed the fair market value of the home. If the home appraisal is lower than the purchase price, your lender may not approve the loan. If you’re refinancing your mortgage, the appraisal determines your LTV, which influences your new interest rate. 

Can I see what my home is worth even if I’m not selling?

Yes, there are several ways you can find your home’s value without using a home appraiser. One of the best and fastest ways is to look at recently sold homes in your area that are comparable in size and features, called real estate comps.