What is a home appraisal and how much does it cost?

Whether you’re looking to buy a house, sell or refinance, a home appraisal is likely going to be an important part of the process. After all, you’ll typically need to know how much a house is worth before you can make any meaningful financial moves on it.

What is a home appraisal?

A home appraisal is a process through which a real estate professional determines the fair market value of a property.

Home appraisals are typically required when you take out a mortgage, whether to purchase or refinance a house. The appraisal can assure you and your lender that the price you’ve agreed to pay for a home is fair.

Appraisal contingency

If you need a mortgage to buy a home, your real estate agent will likely suggest that you include an appraisal contingency in the sales contract. The appraisal contingency lets you walk away from a home purchase if the appraisal comes in too low to justify the agreed-upon purchase price.

While highly recommended in many cases, appraisal contingencies aren’t required. You may want to skip the contingency if you’re buying a home with cash or you’re in a seller’s market.

However, it makes a lot of sense to include one if you’re buying your first home or you’re on a tight budget. The contingency protects you from paying too much for a house that’s worth less than it’s being sold for.

Home appraisal vs. home inspection

An appraisal differs from a home inspection, which is a much more in-depth process. In a home inspection, an inspector specifically looks for problems in the home and determines whether certain areas need repairs. An inspector may test outlets, run the home’s furnace to see if it can hold a stable temperature and look at the roof to see if it’s been properly installed and maintained.

A home appraiser will take into account visible defects, such as a caved-in roof or an improperly functioning plumbing system, but an appraiser doesn’t search for specific problems.

Instead, the appraiser mainly looks for an overall value to assign to the property without digging for deeper issues that can impact how much you’ll end up spending to repair the home. An appraiser might require a specific type of inspection if there are safety concerns.

How much does an appraisal cost (and who pays)?

A home appraisal can cost anywhere in the $600-$2,000 range. You’ll pay less for a single-family home appraisal than for a multifamily home appraisal.

Factors that impact the cost of an appraisal

The amount a home buyer pays for an appraisal depends on various factors, including:

• The size of the home
• The home’s location
• The amount of property research that the appraiser ends up doing before they issue a final value report
• Whether the appraiser surveys property lines to make sure the listed square acreage is correct (more common with properties on large plots of land)
• Whether the property is in a rural area, as buyers can expect to pay a higher appraisal fee in these areas simply because fewer appraisers work in them

How long does a home appraisal take?

Several factors determine how long an appraisal takes. These include 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.

Types of house appraisals

Besides the traditional in-person appointment, your lender may schedule a different type of appraisal, depending on your situation. Over the last few years, technology has made it easier to assess a home’s value without an appraiser being physically present.

Below are a few types of appraisals worth considering.

• Hybrid appraisal: A hybrid appraisal combines a virtual and in-person visit. The appraiser will use photographs from the listing or home inspection to view the property. They’ll also hire a local professional to gather additional information on the home, such as room measurements or details on specific features.
• Desktop appraisal: A desktop appraisal is simply done from the appraiser’s computer. The appraiser will use only public records, floor plans of the house and comparable properties in the area (called real estate comps) to get the information they need.
• Drive-by appraisal: Some lenders may use what’s known as a drive-by appraisal for qualifying borrowers. With this appraisal type, the appraiser examines only the exterior of the property and any available real estate records to determine the home’s value.

Home appraisal tips for refinancers

When you’re refinancing, you’ll want to get the highest appraisal value possible. A low appraisal value could keep you from refinancing, but a high appraisal value means more home equity is available to you – which could result in more cash out or better loan terms.

Increase your chances of a high appraisal value by reviewing our refinance appraisal checklist and taking the steps described next.

1. Get an outside opinion

Your home is likely a place where you’ve made many memories, perhaps making it hard for you to notice any defects in the house. Have a friend or family member examine each room in your home and point out areas that can be improved. Sometimes, a fresh perspective on the property is just what the homeowner needs.

2. Declutter

A thorough decluttering will help each room look more put-together. While your appraiser shouldn’t assess your home’s value based on the amount of clutter or mess, they may see your home favorably if everything’s tidy. The absence of clutter also shows them you’re not trying to cover up any potential flaws or defects in the property.

3. List upgrades and improvements

Upgrades and improvements can increase your property’s value, but the work you’ve done may not always be obvious. Did you get a new air conditioner? Replace the windows? Add new landscaping? Provide your appraiser with a list of upgrades you’ve made so they can consider these items in their report.

Bear in mind that these must be improvements that impact the value of your home. For example, if you didn’t previously have an air conditioner, the addition of central air adds value. However, if you replace a broken air conditioner, that’s considered maintenance and doesn’t add to the home’s value.

Home appraisal FAQs

Navigating the home appraisal process can be confusing and stressful, but it doesn’t have to be. To help you feel better prepared, here are answers to some of the most frequently asked questions about home appraisals.

Do I need to get a home appraisal?

If you’re refinancing your home or using a mortgage to finance the purchase of a new home, your lender will likely require you to get an appraisal before you can close on the loan. However, if you’re buying a house with cash, a home appraisal isn’t an absolute necessity.

Keep in mind, though, that it’s still a good idea to get the home appraised so you know you’re paying a fair price for the property.

How long does it take to close after the appraisal is done?

The time it takes to close after a home appraisal is done typically depends on several factors, but on average, it can take 1-3 weeks. However, it can take over a month at times.

Who pays for the home appraisal?

Unless the home appraisal cost is negotiated with the seller, the buyer typically pays for the appraisal. Factors that can affect the appraisal fee include the home’s location, size, age, condition and any research the appraiser does on the property.

What can I do if I receive a low appraisal?

If you’re buying a new home and the appraisal comes in low, your mortgage lender won’t lend you more than the appraised amount. You can opt to pay cash to cover the difference between the appraised value and the loan amount, or you can negotiate for a lower sale price or decide not to move forward with the purchase.

If you’re refinancing your home, you may want to challenge the appraisal if you believe the appraiser missed valuable additions or made mistakes on the report.

The bottom line on home appraisals

A home appraisal benefits everyone involved in the home buying process. For buyers, an appraisal ensures they’re paying the current fair market value. For sellers, an appraisal helps them price their home competitively.