What is a home appraisal?

A home appraisal is a professional assessment of a home’s current market value by a neutral third-party (not the buyer or seller). During an appraisal, the assessor takes a good look at the property from the inside out, noting details from the home’s layout to the neighborhood it sits in.

After the appraiser gathers the info they need, they crunch the numbers to come up with a value for the home. The number isn’t just pulled out of a hat; it’s carefully calculated based on recent sales of similar homes in the area and other market trends.

The home appraisal usually happens after the buyer and seller come to an agreement, but before the mortgage is finalized. While appraisals may look a little different depending on your situation, many follow a similar process:

1. The lender orders an appraisal. Typically, the buyer’s mortgage lender requests an appraisal from a licensed appraiser.
2. The appraiser evaluates the property. An appraiser walks through all parts of the property, taking photos and jotting down notes.
3. The appraiser crunches numbers. The appraiser uses the data compiled in the walkthrough and information about comparable home sales in the neighborhood to find the market value.
4. The buyers receive a report. The appraisal report features the property’s value and explains how the assessor determined that number, including a list of features, photos, potential issues and information about similar properties.

Other types of home appraisals

Getting a home appraisal doesn’t always involve someone examining every nook and cranny of your home. While many lenders require an in-person appraisal, there are a few potential alternatives.

Desktop appraisal

Desktop or virtual appraisals rely on video tours, digital resources and property databases to assess a home’s value without an on-site visit.

Hybrid appraisal

In a hybrid appraisal, the appraiser hires a third-party data collector to walk through a property, collecting photos and other data. The appraiser then makes a determination based on the information received from the third-party data collector and additional research.

Drive-by appraisal

A drive-by appraisal is exactly what it sounds like—an appraisal the assessor conducts from their car. Drive-by appraisals may only include information about the exterior of a property. The drive-by option is often faster and less invasive than a traditional appraisal, but may be less accurate.

Why do appraisals matter?

Appraisals affect everyone involved in the home buying process.

If you’re a buyer, appraisals determine the mortgage amount you might qualify for to finance your new home. Ideally, the estimated value of the home should match or exceed the purchase price. If the house is worth less than the purchase price, the lender may advise you to renegotiate with the seller. If the seller won’t budge, you might have to pay the difference in cash. If you’re refinancing, the appraisal may affect your interest rate.

If you’re a seller, a fair appraisal validates your asking price, helping to speed up the sale and helping you avoid lengthy negotiations based on the buyers’ perceptions of value. An accurate appraisal helps to ensure you receive fair market value for your home, making the selling process smooth.

It's easy to mix up a home appraisal and a house inspection. After all, both appraisals and inspections involve a neutral third party walking through a home before closing. However, appraisers are assessing a home’s value, while inspectors are assessing its safety and function.

Appraisers look for clues that point to a home’s market value. Typically, they’re scoping out:

• Location: Is the home a hop away from essential amenities or nestled deep in nature? The answer may influence how much buyers might be willing to pay.
• Overall condition of the home: A property’s structural integrity and the shape that it’s in are of vital importance to its value.
• Real estate comps: Real estate comparables, or “comps” for short, are similar properties that have recently sold near your home. Comps help appraisers make realistic estimates.
• Home improvements: Does the house feature a fancy new kitchen or spruced-up garden? Well-done upgrades and DIY projects may boost a home’s value.
• Market trends: What’s hot and what’s not matters, too. Architecture or design elements that align with trends may be more valuable than dated choices. (Move over, modern farmhouse. You had your moment in the sun.)

Home appraisal costs usually fall between about $300 and $430. Factors like the size and location of the property, complexity of the appraisal and the home’s condition may all influence the cost.

Who pays for a home appraisal?

Generally, the buyer foots the bill as part of closing costs—but sometimes you can negotiate. In a sizzling buyer’s market, the seller might agree to pay the appraisal fee to seal the deal.

The entire home appraisal process—from request to report—may take about a week.

What about the “snooping around the house” part? The amount of time an appraiser spends in a home may vary depending on the property’s size and complexity. But a full appraisal usually takes a few hours at most.

• Make sure you understand the area: Conducting research yourself or hiring a knowledgeable local real estate agent may give you an idea of home values in the area. That way, you’re less likely to be caught off guard by an unexpected appraisal amount.
• Keep your appraisal contingency: An appraisal contingency is part of your purchase agreement that allows you to renegotiate or back out if the appraisal falls short of the amount you agreed to pay. Waiving the contingency might mean losing your deposit.
• Appeal the appraisal if needed: If the numbers just don’t add up, follow your curiosity and challenge the appraisal. Sometimes a second look can make all the difference. If a second opinion doesn’t move the needle, you may want to walk away.

• Provide an offer list: Show off your home’s best features—highlight upgrades and improvements to help dazzle both the appraiser and potential buyers.
• Attend the appraisal: Make sure you’re at the appraisal to showcase your home’s charm and answer any questions.
• Read the report thoroughly: Read your appraisal from top to bottom. Appraisers are only human and make mistakes. For example, a typo like listing a 1,400 square foot space as 1,040 square feet could significantly affect the property’s valuation. Errors might require a correction or a completely new appraisal.

• Get a second opinion: Before the appraisal, ask a trusted friend or family member to take a good look at your home and yard. Ask them to point out potential issues or spots that could use a little improvement.
• Declutter and clean: Clear out the clutter and give your home a thorough cleaning to make every square foot count during the appraisal.
• List upgrades and improvements: Showcase all your fancy upgrades by providing a detailed list of home improvements.

Good news—after the appraisal process ends, the finish line is typically in sight. At this point, it’s time to tie up any loose ends. For buyers, that might mean completing final walk-throughs while the lender finishes processing the mortgage. Understanding how appraisals work may help you breeze through the process and get closer to your goals.