Woman with measuring tape appraising hone.

Home Appraisal: Everything You Need To Know

Holly Shuffett8-Minute Read
January 13, 2022

When you’re in the midst of the home buying process you might see potential homes through rose-colored glasses – especially when there’s good staging. Or maybe you’re more selective and any unsightly characteristic will have you out the door. Despite which of these scenarios you identify with you’ll find that home appraisals are a crucial component for the sale of a home.

Whether you’re a buyer or a seller, knowing how home appraisals work and being prepared to put your best foot forward is important. Let’s break down what a home appraisal is and what you can expect during this step of the home buying process. 

What Is An Appraisal?

A home appraisal is an objective assessment of your home’s value, conducted by a neutral third-party who will look at the age and condition of your home, as well as its location and market data in your area.

Home appraisals for a refinance or home purchase are used by lenders during the mortgage lending process to ensure that your loan is of an appropriate value, and appraisals may also serve as a determinant for property taxes. Appraisals are usually a necessity to obtaining a loan since they give lenders a better idea of how risky you are as a borrower. 

Home Appraisal Vs. Home Inspection

It can be easy to conflate home appraisals and home inspections – after all, they both involve a third party coming to visually assess your home, right? But home appraisals differ from a home inspection in that they are less thorough when it comes to specifics, but they encompass more of the big picture regarding your home’s value.

A home inspector is there with the intention of identifying weak points or problem areas in a home, which can give the home buyer a better idea of how much it will cost to maintain or repair any issues. Home inspection reports are extremely detailed, with evaluations on interior structures, utilities, and everything else which makes up the property.

Home appraisals on the other hand, are less detail-oriented and will typically focus on identifying glaring visual defects, like foundational issues, water damage, or a caving roof. Appraisers are not there to look in-depth for every red flag – their main purpose is to assign a value to your property, which is why they will also consider things like location, comparables, crime rates and school zones. 

Here are a few other ways that home appraisals may differ from home inspections: 

  • Lenders require home appraisals, not home inspections
  • Home appraisals will be ordered for you by your lender, while you must set up a home inspection independently 
  • Home appraisals have the potential to affect your loan
  • Accompanying a home inspector during their inspection is encouraged; you should not tag along during a home appraisal
  • Home appraisers and home inspectors have different skill sets and respective trainings and certifications to get their jobs done 

How Do Appraisals Work?

Each appraiser may have their own way of completing the home appraisal process, but many will look at the following characteristics: 

  • The lot and size of the home - this means square footage and the number of proper bedrooms and bathrooms
  • Health and safety considerations 
  • Curb appeal and exterior appearance 
  • Permanent additions or upgrades to the property including basements, pools, decks and garages
  • The overall quality and condition of the home
  • If the property conforms to the neighborhood – for resale purposes
  • Comparable homes in your area and what they have sold for 

How Long Does An Appraisal Take?

As you might expect, how long the in-person visit of a home appraisal takes depends largely on the size of the home. If you have a modestly sized property, a full appraisal may take no longer than a half-hour, while large homes could take several hours.

Other factors which can affect how long it takes to have your home appraised include timing, location and the availability and workload of appraisers in your area. If you’re in the middle of peak buying season, it’s probable that your appraisal company is fielding an abundance of requests from lenders on behalf of hopeful home buyers like yourself.

COVID-19 has also affected the speed and overall way the appraisal process works. Because new processes must be followed to ensure a safe visit, the overall appraisal process can take slightly longer to complete. Both Fannie Mae and Freddie Mac now allow “desktop appraisals,” which allow appraisers to walk the exterior and use a combination of MLS photos and remote video walkthroughs of the interior. Rocket Mortgage® doesn't offer desktop appraisals at this time.

Once your home is assessed, the appraiser will gather data on comparables – or recently sold homes in your area that are similar to your property. Based on the information they’ve gathered, your appraiser will create a report detailing the home with an estimated market value. Start to finish, this process may take a few days or even weeks, depending on when you need an appraiser and whether their availability may be backlogged. 

Preparing For A House Appraisal: What The Involved Parties Need To Know

What Sellers Need To Know 

When you’re selling a house, a low appraisal can mean you’ll have to accept less for your home than you may have anticipated. The best way to be prepared and know you’ve put your best foot forward is to work with your agent and put together relevant documentation for the appraiser that could get you a more accurate valuation – don’t expect the appraiser to just know you’ve just installed a brand new, top-of-the-line furnace. 

What Buyers Need To Know 

If you’re buying a house with a mortgage loan, the appraisal is one of the most important steps toward a successful home closing

If the appraisal comes in at or above the purchase price agreed to in the contract, the sale can proceed as planned. If the appraisal comes in below that, however, your lender will adjust the amount they’re willing to give you. After all, a lender doesn’t want to lend more than what a house is worth. 

What Refinancers Need To Know

Just as when you first purchased your home, your lender will want to know what your property is valued at during the process of a home refinance. Lenders want to ensure you have sufficient equity in your home and that you don’t owe more on the property than it’s worth.

Refinancers should follow the same advice given to sellers: put your home’s best foot forward for the appraiser by tidying up and preparing documentation of any upgrades that could boost its value.

Tips For Getting A Higher Home Appraisal

When selling or refinancing, you have a vested interest in making sure your home appraises for as high a value as possible. And although there may be factors out of your control – like square footage or the sold price of any comparables – there are some things you can do to make your home look its best and make your appraiser’s life easier:

Create A List Of Improvements 

Before the appraiser arrives, make a list of every improvement you’ve made to the home. List out the work done and the date it was completed, and if possible, include receipts, invoices and any applicable permits.

Neighborhood comparables are a big consideration when appraising a home, but when you can show a long list of improvements, it’s likely to look favorable in the appraiser’s final numbers.

Keep in mind, though, that not every improvement is going to be worth something in the eyes of an appraiser, particularly if it only adds aesthetic value, or if it isn’t a permanent addition to the home. A fresh coat of paint isn’t in the same league as, say, a new heating and cooling system. 

Explain The Comparables 

The appraiser will be able to pull the basic information on the size and price of recently sold homes in your area. What they won’t do is actually enter each home to see its condition. Other than photos they won’t know if the kitchen was in need of an upgrade or if the flooring was showing some wear and tear.

Before the appraiser arrives, make sure you’ve done your research on the properties that have sold in your area over the past 6 months. If a comparable home sold for less than you’d like yours to appraise for, understand why. 

Did it have structural issues or outdated bathrooms? This is the information you’ll want to share with your appraiser so they have a better understanding of your home’s true market value. 

Focus On Curb Appeal 

The outside of your home is the first thing the appraiser is going to see when they arrive. For the most part, the appraisal will involve looking beyond cosmetics, but having good curb appeal makes for a good first impression and shows the appraiser that your home is well-maintained.

If the weather is nice, make sure the grass is nicely mowed and that your yard is rid of any unruly weeds. Consider having a few well-placed flower pots to add some color or putting down a fresh layer of mulch to spruce things up.

Give The Appraiser Space 

While you might be tempted to follow the appraiser around to make sure they see everything that’s great about your home, smothering them can be a big red flag and make it seem like you have something to hide.

When your appraiser arrives you should simply give them an overview of your home, explain the improvements you’ve made, and talk about the neighborhood. But after an introduction, you should step back and let the appraiser do their job.

Home Appraisal FAQs

Who pays for the appraisal? 

Unless you negotiate as much, home buyers will nearly always be responsible for the cost of appraising a home. The amount can either be paid upfront or added to the closing costs. During closing, buyers will receive a Good Faith Estimate (GFE) from the lender which will include the cost of the appraisal. 

How long is an appraisal good for? 

While there’s no set deadline for an appraisal, banks typically won’t accept an appraisal report older than 3-6 months old. The real estate market is constantly in flux so the more up-to-date the appraisal, the better. 

What should you do if your appraisal comes in low? 

If you’re a seller whose home has been appraised at a lower value than expected, you can present data to rebut the appraised value – just be sure to stay realistic. You can also reduce your home’s listed price, or if you have an interested buyer, negotiate that they make up the difference in closing costs or agree to meet somewhere in the middle. Worst case scenario, you also always have the option of walking away, though, you run the risk of struggling to find a new buyer, but when you do, their lender’s appraiser might have a more favorable view of your home.

If you’re a buyer whose appraisal has come in low, you’re given a bit more power. You can use a low appraisal to further negotiate a lower purchase price with the seller, though you should discuss an action plan with your real estate agent before doing so. 

Should you skip a home appraisal? 

If you have a strong credit history and are working with a lender who uses an automated underwriting system – most lenders do – you may be able to forgo a home appraisal altogether. 

Skipping a home appraisal can save you money upfront and may help you close on your home faster, but you also run the risk of overpaying on a home. It’s important to assess your own financial situation and timeline and make an informed decision that best meets your needs. 

What is an appraisal waiver?

An appraisal waiver allows qualified buyers to skip the in-person visit and streamlines the overall appraisal process. Here are some factors you can expect when seeing if you’re eligible for an appraisal waiver: 

  • Must qualify through Fannie Mae or Freddie Mac guidelines
  • 20% minimum down payment
  • Strong credit score
  • Must be purchasing or refinancing a single-family home or condo

It is important to note, loans backed by Fannie Mae may receive an inspection-based waiver excluding them from a full appraisal review if Fannie Mae feels the data has been provided by a qualified source and the information provided is thorough. Talk to your lender to discuss waiver options if your loan is backed by Fannie Mae.

The Bottom Line

Whether you’re buying, selling or refinancing, it’s a good idea to know the ins and outs of the home appraisal process. You don’t need to fear the appraisal, but you do need to prepare for it.

Keep your house in good shape, have documentation ready for the appraiser, and be open-minded and knowledgeable about your options should things go unexpected. If you’re ready to begin your home buying journey, work with a Verified Partner Agent through Rocket Homes®.

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Holly Shuffett

Holly Shuffett is a staff writer who writes with a focus on homeownership and personal finance. She has a B.A. in public relations from Oakland University and enjoys creative writing and reading in her free time.