A home appraisal is a professional valuation of your property. The outcome is a written report that offers a recommended home value based on an on-site walk-through and local market data.
The buyer's lender will usually require an appraisal for a home sale financed by a mortgage, which is the case in most transactions. You may also need an appraisal if you decide to refinance your property.
In this guide, we’ll cover everything you need to know about home appraisals: What they are, how much a home appraisal costs, and what to expect from the process. We’ll also explain how to prepare your home for an appraiser to help you get the highest valuation possible.A home appraisal is a professional valuation of your property. The outcome is a written report that offers a recommended home value based on an on-site walk-through and local market data.
The buyer's lender will usually require an appraisal for a home sale financed by a mortgage, which is the case in most transactions. You may also need an appraisal if you decide to refinance your property.
In this guide, we’ll cover everything you need to know about home appraisals: What they are, how much a home appraisal costs, and what to expect from the process. We’ll also explain how to prepare your home for an appraiser to help you get the highest valuation possible.
Understanding appraisals helps you plan your offer strategy, negotiation approach, and price expectations. If you need help navigating this step, a professional real estate agent could be an irreplaceable partner who’s always in your corner. (And if you’re not working with a trustworthy agent yet, Clever Real Estate can connect you with a top-rated agent in your area.)
What a home appraisal is and how it works
A home appraisal is an estimate of a home’s market value prepared by an independent, state-licensed professional. The appraiser acts as an independent third party and does not work for the buyer, seller, or lender.
The main role of a property appraisal is to protect both the buyer and the lender from overpaying for a property and to protect the lender from financial risk.
An appraiser determines the value of a home using three main variables:
- On-site assessment: A physical walkthrough to evaluate the home’s condition, features, and quality
- Comparable recent sales (comps): A review of recently sold homes in the area that are similar in size, age, and style to the property being appraised
- Market trends: An analysis of broader neighborhood data; for example, verifying whether property values in the area are rising or falling
Why does your lender require an appraisal?
Lenders use the home as collateral for the mortgage. So if a borrower stops making payments on the loan, the lender needs to know they can sell the property to recover their money.
For example, if a home is appraised at $400,000, your bank likely won’t lend $500,000 to buy it, even if that is the agreed-upon purchase price.
🤔 Appraised value vs. market value. Buyers and sellers need to understand the difference between the two. Market value is determined by the open market — it’s how much a buyer is willing to pay for the property. By contrast, the appraised value is what the historic data and property condition prove the home is worth in the lender’s eyes.
In certain situations, appraisals may not be required. For example, if you are buying a home for cash, you can choose to skip the appraisal (though it’s risky and not recommended). Some buyers or homeowners who refinance may also be able to qualify for an appraisal waiver, in which the lender relies on an automated system, rather than a human inspection.
Why appraisals matter for buyers, sellers, and refinancers
Let’s unpack how the appraisal and its results can influence the outcome, depending on your role in the transaction:
Buyers
For buyers, an appraisal acts as a safeguard, ensuring you are not overpaying for the property. However, it can also become an obstacle to your perfect home. Nearly all mortgage types (conventional, FHA, or VA) require a satisfactory appraisal. If the value comes in significantly lower than your offer price, your financing may be in danger.
Sellers
If you’re selling a home, a low appraisal can force you to lower the sale price or offer concessions to the buyer to retain their interest. In atypical or rural markets, where it may be difficult to determine a fair price, some sellers opt for a pre-listing appraisal, though these are less common in fast-moving markets.
Refinancers
If you’re refinancing, the appraisal determines how much equity you have in your home. In this situation, a higher appraised value is good news — it can help you remove private mortgage insurance (PMI), qualify for a lower interest rate, or potentially allow you to borrow more cash (in a cash-out refi). You may be able to qualify for an appraisal waiver in certain cases, so check with your lender before contacting the appraiser.
What appraisers look at during the property visit
Many homeowners may worry about a messy living room affecting the value. Fortunately, appraisers are trained to look past clutter. Instead, they focus on the property's permanent structure and functional aspects.
Factors that influence value
- Interior condition: The quality and condition of the flooring, walls, windows, and doors. The appraiser will also pay special attention to the condition of the kitchen and bathrooms, and ask about any recent updates.
- Exterior condition: The state of the roof, siding, foundation, driveway, and drainage
- Systems: The age and functionality of the HVAC, plumbing, and electrical systems
- Functional layout and size: The square footage, number of bathrooms and bedrooms, and any additional spaces. The appraiser will also likely assess whether the layout is functional (e.g., ensuring you don’t have to walk through a bedroom to get to the kitchen).
- Health and safety: This is especially critical for FHA, VA, and USDA loans. An appraiser will look for any lead risk, broken windows, or safety hazards like exposed wires.
What doesn’t matter: Generally, you don’t have to worry about cleanliness (unless it shows neglect) or the condition of the furniture and any movable items, such as rugs or curtains. As a rule, imagine moving out and completely emptying the place — whatever stays for the next owner is what matters to an appraiser.
The top things that hurt an appraisal
Many factors can influence the outcome of the appraisal report. Here are the main things to keep in mind:
- Deferred maintenance: Peeling paint, rotting wood, or leaky faucets.
- Unpermitted work: A room addition that was built without permits is likely to be excluded from home valuation. It can even be considered a safety risk and require a retroactive permit.
- Structural or foundation issues: Cracks in walls, foundation shifts, or a damp basement.
- Roof problems: Visible damage, missing shingles or tiles, or sagging.
- Outdated systems: If electrical or plumbing systems have not been updated in a while and show signs of aging, that may act as a red flag to the appraiser.
- Pest damage or infestation: Problems with termites or mice can significantly lower your appraisal and even be considered a safety issue in some cases.
- External nuisances: Proximity to a busy road, warehouses, or even poorly maintained neighboring properties can all decrease the final number on the appraisal report.
How long does an appraisal take?
First, the appraiser will visit the property, where they are likely to spend anywhere from 15 minutes to a couple of hours, depending on its size and the complexity of the process.
After the visit, the appraiser will need time to research comps and compile the data. Typically, you can expect to receive your report within several days to a week, although in busy markets, it can take up to two weeks.
Home appraisal cost
For a standard single-family home, the average home appraisal cost typically ranges between $350 and $600.[1] However, this depends on your area and the complexity of the appraisal.
A few factors influence the final price:
- Size: Larger properties take longer to measure and assess, which may reflect in the final price.
- Location: Rural properties require longer travel time and are harder to find comps for.
- Complexity: Unique properties, such as historic homes or log cabins, are harder to value.
- Loan type: Government-backed loans (FHA, USDA, or VA) require additional checks, and their appraisals may be more expensive.
- Rush fees: If you need a report as soon as possible, an appraiser may charge you an additional fee.
Generally, it is not uncommon to see a total price reaching $600-1,000+ for complex properties or those in high-cost living areas. If you’re working with a lender, you typically can’t hand-pick an appraiser, as they are required to use an independent specialist assigned at random.
❓Who pays for an appraisal? Typically, a buyer or refinancer pays for an appraiser. However, it’s your lender who will order their services.
Types of appraisals
The type of appraisal you get will depend on whether you're applying for a mortgage, refinancing, or setting a listing price for your home. If you're buying or refinancing your mortgage, your lender will usually order a full appraisal.
Full appraisal
The most commonly used type, where the appraiser inspects the entire property, measures the square footage, and takes photos. It's conducted by a licensed appraiser and may take up to two weeks to complete. Sometimes, it’s referred to as a “1004 appraisal” after the form used for the report.
Drive-by or exterior-only appraisal
A rare form of appraisal where the appraiser only takes pictures of the outside of the home and relies on public records for interior details. It's typically used only for appraisal reviews or second lien mortgages. A drive-by appraisal may also be referred to as a “2055 appraisal.”
Hybrid appraisal
A hybrid appraisal is similar to a full appraisal, but a third party (a real estate agent or an inspector) visits the property and takes photos and measurements.
Hybrid appraisals speed up the process by freeing up licensed appraisers to spend more time on the report and analysis, since the walk-through can be performed by someone who is not a licensed professional. This type of appraisal is fairly new, and because the appraisers who conduct them may not be covered by their insurance companies, not all appraisers offer them.
Desktop or automated valuation model (AVM) appraisal
These can be done online, often for free. One well-known AVM is Zillow's Zestimate tool.
A desktop appraisal can be a good option for sellers and real estate agents when determining a listing price. However, it's rarely accepted by mortgage lenders.
Broker price opinion (BPO)
A BPO is when a licensed broker provides a professional opinion of a home's value. BPOs can be handy for setting a listing price for FSBO sellers, and they're often used to support canceling mortgage insurance for a home loan. However, a BPO can't be used as a replacement for a traditional home appraisal.
What happens if an appraisal comes in low?
If the appraisal comes in lower than the agreed-upon price, the lender may only issue a loan based on the appraisal value, not the purchase price. Because buyers are responsible for covering the difference between the mortgage amount and the price, a low appraisal can become a deal killer.
Here’s how buyers can handle an “appraisal gap”:
1. Renegotiate the price
The most common solution for buyers is to ask the seller to lower the price to match the appraisal. If the gap is small, sellers often agree to keep the deal moving.
2. Ask the seller for concessions
The buyer and the seller can agree to split the difference. Alternatively, a seller can agree to concessions, for example, covering some part of the closing costs.
3. Challenge the appraisal
If you believe an appraiser made a genuine error, your lender can submit a Reconsideration of Value (ROV). However, this may be difficult to win and requires hard data to prove the appraiser wrong.
4. Include an appraisal gap guarantee
In hot real estate markets, an appraisal gap guarantee clause can be written into a buyer's offer. This promises that if the appraisal is low, the buyer will pay the difference in cash up to a certain limit.
5. Walk away
If the contract includes an appraisal contingency (most do), the buyer can back out of the deal and get their earnest money back if the seller refuses to negotiate.
How to prepare for an appraisal (for sellers and refi homeowners)
While you cannot change your square footage or location, you can take some other steps to maximize your home’s appraised value:
- Fix small issues: Walk around your home and tighten loose handrails, replace burnt-out lightbulbs, and patch small holes in the drywall. All these small things may signal deferred maintenance for an appraiser and affect the final number.
- Declutter: You don’t need your home to look like something from Architectural Digest, but easy access for an appraiser is a must. Make sure areas such as the attic, basement, and electrical panels are not blocked by boxes.
- Check functionality: Ensure the furnace turns on, the windows open and close, and the toilets flush.
- Provide all possible paperwork: Come with a list of upgrades and renovations you have done, including dates and costs.
- Unlock all rooms and outbuildings: Locate the key to your shed ahead of time so you don’t have to look for it at the last minute.
- Don’t forget curb appeal: Trim overgrown bushes and mow the lawn. The outside is the first thing an appraiser notices, and it also signals how well you’ve been taking care of your place.
Home appraisal vs. home inspection
Appraisals and home inspections are often mistaken for the same thing, but they are distinct services performed by different professionals.
| Home appraisal | Home inspection | |
|---|---|---|
| Main goal | Determine the value of the home | Determine the condition of the home |
| Who performs it | A licensed appraiser | A licensed home inspector |
| What’s evaluated | Visual review and market data analysis | In-depth walk-through of the home and tests of systems, outlets, and structure |
| Outcome | A report with the valuation (dollar amount) | A report of defects and repairs needed |
| When takes place | After the inspection is resolved | Immediately after the offer is accepted |
| Required? | Yes, for almost all mortgages | Not legally required but highly recommended |
Home appraisal vs. comparative market analysis (CMA)
These two are more similar, but they still serve different purposes and cannot be used interchangeably.
- CMA: Created by a real estate agent to help sellers set a listing price. It is an estimate based on comps, recent listings, and general market knowledge.
- Appraisal: Created by a professional licensed appraiser, following strict guidelines. It’s based on extensive market research and is the only valuation the lender will accept.
It is common for a CMA and an appraisal to produce different numbers, sometimes significantly. An appraiser’s report is usually more data-driven and has to comply with strict guidelines.
If you don’t think you need a full appraisal and want to explore a CMA, Clever can help you find a top agent in your neighborhood who can give you a good ballpark estimate. Take a quick quiz to get started.
When you might not need an appraisal
In some cases, you may not need an appraisal. Here are some common scenarios:
1. Cash purchase
You don't need an appraisal if you're buying a home with cash because you're not dealing with a mortgage lender. However, you might still want to get a home appraised. Getting a home appraised reassures lenders that the home is worth their money. As a cash buyer, you may want the same reassurance.
2. Refinance waiver
Some refinances, or buyers with large down payments, may qualify for an appraisal waiver. Typically, it’s possible if you have significant equity in the property (although you’d still need to meet other standards, depending on the loan type).
3. Properties with recent prior appraisals
In rare cases, if the property is sold or refinanced shortly after purchase, a lender might use a previous appraisal. However, it’s an uncommon practice.
The bottom line
A home appraisal is a necessary step in many people's real estate journey. While it can be stressful, knowing what appraisers look for and how to prepare can make the process easier.
If you are worried about a low appraisal, the best defense is to prepare in advance. A skilled real estate agent can help you navigate appraisal issues, negotiate after the low appraisal, and prepare your home to get the best possible outcome.
Need an agent to help you with your transaction? Clever Real Estate can connect you with full-service vetted local agents; it’s free, with no obligation. Take a short quiz to get started.
FAQ
What happens during a house appraisal?
During a home appraisal, a licensed professional will visit the property to measure the square footage, photograph the interior and exterior, and assess the overall condition. Later, they will combine their findings with data on similar homes nearby to calculate the fair market value.
How much does a home appraisal cost?
Typically, a home appraisal costs between $350 and $600, though prices can reach $1,000 or more. The final cost depends on your location, the type of loan, and the amount of work for an appraiser.
What negatively affects a home appraisal?
Factors that hurt a home appraisal include structural issues, deferred maintenance, and lack of recent updates.
How long does an appraisal take?
The physical inspection will take between 15 minutes and 2 hours. However, receiving the final report typically takes several days to a week after a visit, depending on the appraiser’s workload.
Can a seller refuse an appraisal?
Technically, yes, a seller can refuse the appraisal. However, it’s likely to jeopardize the sale because most lenders require an appraisal to approve the loan. A seller’s refusal to allow entry to an appraiser can often constitute a breach of the purchase contract, potentially leading to legal action.
Can you challenge an appraisal?
Yes, it is possible to challenge the report if you believe the appraiser made a mistake, though proving it may be difficult. To start the process, you’d need to request a Reconsideration of Value from your lender.
Does cleaning help an appraisal?
Cleaning does not directly affect the appraisal value, as appraisers look at structure and condition, not dusty shelves. However, a clean, decluttered home makes an appraiser's job easier and gives the impression that the house is well cared for.
Do appraisals include outbuildings, basements, or garages?
Yes, an appraiser will consider the value of garages, finished basements, and permanent outbuildings such as workshops or barns.
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How Much Do Realtor Fees REALLY Cost? Realtor fees differ from state to state. This article covers how much you can expect to pay in realtor fees, whether you're a buyer or seller.