A Guide to Home Appraisals

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Navigating the world of real estate can be overwhelming, especially when it comes to understanding the value of a property. This is where home appraisals come in – a crucial step in any homebuying, selling, or refinancing process.

We are here to help you understand the home appraisal process, offering insights and practical tips on how to prepare, what to expect, and how to interpret the results.

What is a Home Appraisal?

The main goal of a home appraisal is to determine how much a house is worth in the current real estate market. An appraisal verifies the price of the home meets the fair market value, which is simply based on how much people are willing to pay for the property.

The home appraisal is conducted by a licensed, unbiased appraiser who is trained to evaluate properties. Your lender will most likely hire the appraiser or provide contact information for appraisers in your area. Most mortgage lenders require an appraisal as a security measure to ensure they are not loaning you more money than the home is worth.

Home Appraisal vs Home Inspection

A home appraisal and a home inspection may seem similar but are two very different things. While an appraisal assesses the value of the home, an inspection assesses the condition of the home.

During a home inspection, inspectors thoroughly examine the house to find any potential problems and identify areas that require repairs. Home inspections are mainly done for the buyer’s benefit and usually aren’t required. In fact, buyers may use the inspection report when negotiating with the seller to cover the cost of needed repairs.

What Do Home Appraisers Look For?

There are three main aspects appraisers focus on: the general condition of the property, any home improvements or renovations, and home values in the surrounding area. Below is a checklist of common items that appraisers should carefully examine.

Home Appraisal Checklist

  • Square footage and number of bedrooms and bathrooms
  • Type of foundation and building materials
  • Overall maintenance (cleanliness, decluttering)
  • Condition of plumbing, electrical, HVAC systems and appliances
  • Structural integrity (roof, walls, floors)
  • Presence of a basement, crawl space, or attic
  • Lot size and total acreage
  • Driveway and garage condition
  • Curb appeal and landscaping quality
  • Condition of any exterior amenities like pools, fireplaces, fencing, or decks
  • Home location and zoning classification
  • Energy-efficient features
  • Sales trends and price ranges for comparable homes in the neighborhood

Make sure all rooms and the home’s perimeter are accessible for the home appraiser. It’s wise to keep any pets locked up or away from the property while the appraiser is evaluating.

What Hurts a Home Appraisal?

Several factors can lead to a lower home appraisal or even cause it to fail. The home’s overall condition is key. If a property shows signs of neglect, such as peeling paint, damaged floors, or a leaky roof, it will likely receive a lower appraisal. This is especially true for kitchens and bathrooms that are outdated or worn.

Structural problems, like cracks in the foundation or roof damage, are major issues that need attention. Homes near noisy highways, industrial areas, or flood zones often get lower appraisals due to these less desirable locations. Curb appeal matters too; a garden that’s overgrown or landscaping that’s been ignored can harm first impressions and reduce the home’s value.

Making overly personalized or unusual modifications to a home can also lower its value. Environmental hazards such as mold, asbestos, or radon are serious concerns and can decrease a home’s worth because of the expensive cleanup required. Finally, in areas with few similar home sales, it can be tough to justify a higher market value.

The Home Appraisal Process

The appraisal process is quite simple and begins with the appraiser conducting an on-site visit to examine the property’s condition, location, size, and features. They evaluate both the interior and exterior of the home, noting any updates, structural issues, or unique characteristics.

The appraiser also considers comparable recent sales in the area to gauge the property’s market value. They take into account factors like neighborhood, proximity to amenities, and any external elements that could affect value, such as traffic noise or local zoning.

Once the assessment is complete, the appraiser compiles a detailed report that includes their valuation and the supporting reasons, which is then used by lenders to determine loan amounts and by buyers and sellers in the negotiation processes.

How Long Does a Home Appraisal Take?

Usually, the home appraisal on-site portion takes approximately one to three hours. How long the full home appraisal process takes heavily depends on the type of appraisal your lender orders and the laws of the state where you live. The home appraisal process can take anywhere from a few days to several weeks from start to finish. According to the NAR 2023 appraisal survey, the median appraisal time was 11 days.

How Much Does a Home Appraisal Cost?

The average appraisal cost in the U.S. is around $500. While this can vary depending on house size and location, it’s good to budget between $300 to $800 for a home appraisal.

How to Prepare For a Home Appraisal

For Homebuyers

  • Educate yourself about the appraisal process: Familiarizing yourself with how appraisals work and what appraisers look for can help you identify areas to focus on during a home visit.
  • Review comparable sales in the neighborhood: Research recent sales of similar homes in the area. This knowledge helps you understand the local market and set realistic expectations for the appraisal.
  • Inspect the property thoroughly: Before the appraisal, visit the property. Look for any issues that might lower the appraisal value, such as needed repairs or maintenance issues.
  • Prepare questions: Have a list of questions ready for the appraiser. This might include inquiries about how they determine value and what factors they consider most important.
  • Document upgrades and repairs: If the current homeowner has made significant improvements, ensure you have a detailed list. This information can be valuable to the appraiser.

For Refinancers

  • Boost curb appeal: First impressions matter. Tidy up the yard, trim the bushes, and make sure the exterior of your home is in good condition.
  • Make minor repairs if necessary: Address any small issues like leaky faucets, peeling paint, or cracked tiles. These small fixes can make a big difference in the appraisal.
  • Deep clean and declutter: A clean, organized home looks better and bigger. Make sure your home is neat and tidy for the appraisal.
  • List any recent improvements: If you’ve made any upgrades or significant repairs since purchasing your home, have a detailed list ready. This can include renovations, new appliances, or major repairs.
  • Gather important documents: Have relevant documents on hand, like your original purchase agreement, property tax bills, home inspection reports, and any home warranty information.

In both cases, being well-prepared and informed can help ensure a smooth appraisal process and a fair assessment of the property’s value.

David Mully

David Mully is president and CEO of Lender Insider, a mortgage consulting firm. With 26 years in the mortgage industry, he has worked as both a mortgage loan officer and in the business-to-business sector of the industry. He is the former author of the weekly “Mortgage Search” column for Observer and Eccentric Newspapers. You can read his blog at http://www.lenderinsider.com/blog.

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