Home Appraisal Guide: Process, Cost, and What to Expect

What Do Home Appraisers Look For?

During a real estate appraisal, the appraiser looks at the big picture and focuses on the features that have the greatest impact on a home’s sale price. Some of the key factors an appraiser considers include:

• The age, location, and size of the home: These are the most important factors in determining a home’s value. Larger, newer homes in high-demand locations are generally worth more than smaller, older homes.
• The home’s condition: While appraisers don’t focus much on small details like what paint color is on the walls, they do want to assess whether the home is updated and well-maintained.
• Home improvements: Homes that have been remodeled and upgraded are worth more than those that are outdated. Appraisers give the most weight to big-ticket updates, such as remodeled kitchens and bathrooms or home additions.
• The home’s major systems: Appraisers want to make sure the roof is in good condition, the HVAC system is functioning properly, and the home has working electric and plumbing. While they don’t do a full inspection, they look for obvious problems, such as signs of a water leak.
• Comparable home sales: Appraisers compare your home to real estate comps, which are recently sold properties with similar features in the same area. These comparable sales help determine whether the home's estimated market value is supported by current market conditions. 

Homeowners don’t have to do much to prepare for a home appraisal, but they should make sure the home is clean and free of clutter that could make it harder to see its features.

What’s Included in a Home Appraisal Report?

After completing the appraisal, the appraiser prepares a report that explains how they arrived at the home’s estimated market value. In addition to the final appraised value, the report typically includes:

• A summary of the home’s key characteristics, including its location, size, age, layout, and features
• Photos of the home’s interior and exterior
• A summary of local market trends, including whether property values appear stable
• A description of the neighborhood and location, including zoning rules
• Any factors that may have affected the home's value, such as significant repairs or unique features
• Information about access to utilities and whether the home is in a flood zone
• A market analysis including information about recently sold properties, their features, and sales prices, and how this home compares

Depending on the loan type or property, an appraisal report may also include additional information required by the lender or appraisal guidelines.

What Can Hurt a Home Appraisal?

Several factors can reduce a home’s appraised value. While homeowners can’t control local market conditions, they can address maintenance issues and complete repairs before the appraisal. Common factors that can hurt a home appraisal include:

• Structural problems
• Major systems that aren’t working properly
• Outdated features
• Deferred maintenance

How Much Does a Home Appraisal Cost?

A home appraisal typically costs between $300 and $600, though the exact price depends on factors like the home's size, location, and property type. More complex properties or homes in areas with fewer available appraisers may cost more.

In most home purchase transactions, the buyer pays for the appraisal as part of their closing costs. The appraisal fee is usually paid up front when the appraisal is ordered or included with your other closing expenses. While the cost varies, it's an important step that helps confirm the home's market value before your lender finalizes your mortgage.

If a buyer wants to move quickly to close on a loan, a lender may request a rush appraisal. This will increase the cost of the home appraisal, but it can speed up the process.

Types of Home Appraisals

The appraisal method used for your loan is determined by your lender and depends on factors such as the property, loan type, and current lending requirements. Not every loan is eligible for every type of appraisal. While a traditional in-person appraisal is still common, some loans may qualify for alternative appraisal methods that use technology or additional data to estimate a home's value.

Traditional Appraisal

A traditional appraisal involves a licensed appraiser visiting the property in person to evaluate its size, condition, features, and overall market value. The appraiser also compares the home to similar recently sold properties in the area before preparing an appraisal report. This is the most common type of appraisal for home purchases.

Desktop Appraisal

A desktop appraisal is completed remotely without an in-person property visit. Instead, the appraiser relies on public records, MLS data, property records, photos, and other available information to estimate the home's value. Desktop appraisals may be used when permitted by the lender and loan guidelines.

Hybrid Appraisal

A hybrid appraisal combines an in-person property inspection with a remote valuation. Typically, a trained third party collects information about the home during the property visit, while a licensed appraiser reviews that information along with market data to determine the home's value.

Drive-By Appraisal

In a drive-by appraisal, the appraiser only inspects the outside of the home. They assess curb appeal and note any visible maintenance needs or damage, while relying on public tax records and MLS data for details about the home’s interior. Drive-by appraisals are less common today, so it’s unlikely you’ll encounter one.

How Home Appraisal Results Impact You

A home appraisal can affect whether your mortgage moves forward as planned. In most cases, the appraised value supports the agreed-upon purchase price, and the loan process continues without issue. However, if the appraisal comes in lower or higher than expected, it can affect your financing or next steps in the homebuying process.

Appraisal Gap: The Appraisal Is Less Than the Purchase Price

If a home appraisal comes back lower than the agreed-upon purchase price, this creates an appraisal gap, which is the difference between the home’s appraised market value and the amount the buyer is paying.

Because lenders base the loan amount on the appraised value rather than the purchase price, a low appraisal can affect the home’s loan-to-value ratio (LTV) and the amount you can borrow. For example, if you’re buying a $500,000 home with a $50,000 down payment, and the home only appraises for $425,000, a lender with a maximum 90% LTV would lend up to $382,500 (90% of $425,000). That leaves a larger gap that you’d need to cover as the buyer.

When this happens, you may negotiate a lower purchase price, increase your down payment, or challenge the appraisal by requesting a reconsideration of value if there’s evidence that the appraisal was inaccurate. Because a low appraisal can affect financing, some purchase contracts can include an appraisal contingency that allows you to back out or renegotiate if the home appraises below the purchase price.

Appraisal Is Higher Than the Purchase Price

Appraisals can also come in higher than anticipated, but this usually won’t cause problems for a home sale because the buyer and seller already have an agreed-upon price.

How to Prepare for a Home Appraisal

If you own a home that’s being appraised, there are a few things that you should consider doing to get the property ready before an appraiser comes, such as:

• Boost your home’s curb appeal: Mow your lawn, clean up your driveway and any sidewalks, and consider basic landscaping upgrades like a fresh layer of mulch. 
• Make minor repairs: Deferred maintenance can be a red flag about a home’s condition, so fix issues like leaky faucets or broken door handles. Also, be sure all smoke and carbon monoxide detectors are working and properly placed.
• Clean the interior and improve accessibility: Clear clutter that could make it hard for the appraiser to see features and make sure all of the rooms of the home can be easily accessed.

Home Appraisal FAQs

Still need to know more? Here are some additional details about home appraisals that go beyond the definition.

What’s the Difference Between a Home Appraisal and a Home Inspection?

A home appraisal is conducted by a licensed home appraiser to determine a home’s fair market value, while a home inspection is conducted by a licensed inspector to identify any problems with the home’s condition, such as a pest infestation or a broken air conditioner. Appraisals are intended to identify if there’s a problem that affects the home’s value, not to give the buyer details on potential future repair costs.

How Long Is a House Appraisal Good For?

Most home appraisals are valid for 90 to 120 days, though FHA, VA, and USDA appraisals are now valid for up to 180 days.  How long an appraisal remains valid for a property depends on the appraisal type, loan program, and the lender’s policy. Appraisals don’t have a very long “shelf life” because market conditions can change quickly. If more than a few months have passed, you may need a new appraisal or pay to update the old one.

How Long Does a Home Appraisal Visit Take?

Home appraisers are usually at a home for a few hours at most, although larger or unique homes with many features can take longer to appraise. Scheduling difficulties or trouble accessing the home can also cause delays.

Who Orders the Home Appraisal?

Your mortgage lender typically orders the home appraisal through an independent appraisal management company (AMC) or directly from a licensed appraiser. Federal regulations are designed to keep appraisers independent so they can provide an unbiased opinion of the home's market value. Buyers and sellers generally cannot choose the appraiser or influence the final valuation.

Final Thoughts: Why Home Appraisals Matter

A home appraisal is one of the most important steps in the mortgage process because it helps confirm a home’s fair market value before a loan is finalized. While the results can sometimes affect your financing or negotiations, most appraisals simply help ensure the transaction moves forward smoothly.

If you’re buying a home or refinancing your mortgage and have questions about home appraisals or any other part of the lending process, Freedom Mortgage is here to help. Contact us today to learn more about your mortgage options and the next steps toward homeownership, including getting prequalified to see your personalized loan options.