What you need to know about your home appraisal

You’ve finally found the perfect house! The seller officially accepted your offer and signed the purchase agreement. But how do you know you are getting a good deal? What if you agreed to pay too much? Your home appraisal will help answer those questions for you.

What you need to know about your home appraisal

What is an appraisal?

An appraisal is an expert opinion on the value of a home. Professional appraisers research the value of the property and provide a value estimate, as well as a written report of their findings to you and the mortgage lender.

The appraisal is used to see if the price of the home is higher or lower than the actual value of the property. It’s meant to protect the bank from lending too much and protect you from paying too much.

An appraisal is different from an inspection. An appraiser notes the condition of the home, including any obvious problems that affect the value of the property. An inspector actually tests and evaluates the systems and structures of the home (plumbing, roof, etc.) to determine any needed repairs and maintenance.

Who does the appraisal?

A trained professional who is both certified and licensed completes the home appraisal.

Mortgage lenders typically have a list of approved appraisers they use. Despite this, the appraiser is not associated with the bank but is a third-party professional. You can always ask your bank for the specific qualifications of the appraiser.

Once a bank orders an appraisal, appraisers contact the seller’s real estate agent to arrange a time to complete the appraisal.

How is an appraisal completed?

The appraiser uses several methods to gather information for their estimate. They visit the home to check out the interior and exterior of the property (some appraisers take pictures and measurements). Appraisers do further research through county records and/or the Multiple Listing Service (MLS) [link] to gather additional information.

The appraiser gathers information on the property, including (but not limited to):

  • Size
  • Age
  • Number of bedrooms and bathrooms
  • Special features (garage, finished basement, etc.)
  • Location
  • Land (lot)
  • Additional buildings
  • Condition
  • Crucial structural problems
  • Neighborhood and comparable homes

There are two different methods appraisers use:

  1. Sales comparison approach: The appraiser takes the information gathered on the home and compares it to other, similar properties in the area that have recently sold.
  2. Cost approach: The estimate is based on the cost to rebuild the property if it’s destroyed. This approach factors in the value of the land and depreciation of the home.

Some appraisers provide both methods in a report, but others use just one. Both methods are acceptable.

The appraiser’s findings are recorded in a written report and sent to the mortgage lender. As the buyer, you are also provided with a copy of the report.

How long does an appraisal last?

The actual visit and inspection of the property typically takes about 30-60 minutes. But the additional research and report can take several days to complete.

How much does an appraisal cost?

The cost of an appraisal varies by location, company, and complexity. The average cost is about $300-400,1 but can be upwards of $500-600, in some cases.

Who pays for the appraisal?

You (the buyer) are responsible for the cost of the appraisal. The fees for the appraisal are paid to your lender at the time of the appraisal and credited to you on the closing statement.

Is there any way to increase a home’s appraised value?

It certainly doesn’t hurt for the home to be clean and organized for the appraisal, but unmade beds or dirty dishes will not affect the value of the property.

Sellers can take steps to increase the appraisal value by making repairs to any obvious, big items that could bring the value of the appraisal down. (Important issues include cracks in walls, water stains, dirty carpet, pests, leaky faucets, broken windows, overgrown landscaping, etc.) Sellers can also list any updates or improvements made to the property that will positively affect its value.

What if the appraisal is too low?

If the appraisal report indicates the property value is lower than the agreed price, you might not be able to borrow as much to pay for the property.

At this point, you can negotiate with the seller or walk away from the deal (and get your earnest money refunded).

As a buyer, you always have the option to request a second appraisal (at your expense). But it’s best to consult with your lender and real estate agent first. Get to the bottom of the reason for the low appraisal before going any further.

If the appraisal is low due to needed repairs and the seller agrees to make the repairs, you can have another appraisal done after the repairs are complete. Otherwise, the seller can agree to lower the price to make the appraisal value work.

If, at any time, you have questions about the appraisal, speak with your lender and your real estate agent to get clarification.

Whether you’re selling or buying a home, the process can feel intimidating and overwhelming. But it doesn’t have to. At Coluzzi Real Estate, we answer all your questions and simplify the process. We’re there for you every step of the way. Please don’t hesitate to contact us today!

1 2018 Home Appraisal Costs, Homeadvisor


About the Author:

Amanda has lived in the Des Moines area since 1999, where she and her husband have bought and sold a handful of homes over the years, including a recent flip. Amanda enjoys writing, obsesses about personal finance and is fond of looking at houses. She loves sharing useful tips and info to make life easier for anyone wanting to buy or sell a home. In her spare time, Amanda cherishes time with her family, volunteers with IHYC, gardens, hikes, and practices TaeKwonDo. You can read more of her writing at whywemoney.com