The Home Appraisal Process Explained: What Every Buyer and Seller Should Know

When you're buying or selling a home, the appraisal process is one of the most critical steps that can make or break your deal. Understanding how appraisals work can save you time, money, and stress during your real estate transaction.

[What Is a Home Appraisal](/blog/home-appraisal-complete-guide)?

A home appraisal is an unbiased, professional opinion of a property's market value. Licensed appraisers conduct these evaluations to ensure that the home's selling price aligns with its actual worth. Lenders require appraisals to protect their investment—they won't loan you more money than the home is worth.

The typical cost of a home appraisal ranges from $300 to $600 for a standard single-family home, though larger or more complex properties can cost $800 or more. The buyer usually pays for this service as part of their [closing costs](/blog/homebuying-closing-process).

Why Appraisals Matter

Appraisals serve multiple purposes in real estate transactions:

For Lenders: They verify that the loan amount doesn't exceed the property's value. If you're borrowing $400,000 to buy a home, the lender wants confirmation that the home is worth at least that amount.

For Buyers: Appraisals protect you from overpaying. If you've agreed to pay $450,000 but the appraisal comes in at $420,000, you have leverage to renegotiate or walk away.

For Sellers: A solid appraisal validates your asking price and can facilitate a smoother closing process.

The Appraisal Process: Step-by-Step

1. Ordering the Appraisal (Day 1)

Once you have an accepted offer, your lender orders an appraisal from an independent appraisal management company (AMC). The AMC assigns a licensed appraiser who has no connection to the transaction, ensuring objectivity.

2. Scheduling the Inspection (Days 2-7)

The appraiser contacts the seller or listing agent to schedule a visit. This typically happens within 3-5 business days of the order. The inspection itself usually takes 30-60 minutes for a standard home, though larger properties may take 2-3 hours.

3. Property Inspection (Day 7-10)

During the site visit, the appraiser examines both interior and exterior features:

Exterior Assessment:

Overall condition and curb appeal
Lot size and landscaping
Garage, driveway, and outbuildings
Foundation and structural integrity
Roof condition and age
Siding, windows, and doors

Interior Evaluation:

Square footage (measured room by room)
Number of bedrooms and bathrooms
Floor plan and layout
Kitchen and bathroom updates
Flooring types and condition
HVAC systems and age
Evidence of water damage, pest issues, or structural problems
Overall maintenance and updates

The appraiser takes extensive photos and notes throughout the inspection.

4. Market Research and Analysis (Days 10-12)

After the inspection, the appraiser researches comparable properties (comps) that have sold recently in the area. They look for homes similar in:

Square footage (within 10-20%)
Number of bedrooms and bathrooms
Age and condition
Location (usually within 1 mile)
Sale date (typically within the last 3-6 months)

The appraiser typically uses 3-6 comparable sales to determine value.

5. Adjustments and Valuation (Days 12-14)

The appraiser makes dollar-value adjustments to the comparable properties based on differences. For example:

If a comp has a renovated kitchen worth $20,000 and the subject property doesn't, the appraiser subtracts $20,000 from the comp's sale price
If the subject property has a pool worth $15,000 and the comp doesn't, the appraiser adds $15,000 to the comp's sale price

After making all adjustments, the appraiser arrives at a final opinion of value.

6. Report Completion (Days 14-15)

The appraiser compiles everything into a detailed report, most commonly using the Uniform Residential Appraisal Report (URAR) form. This 6-8 page document includes:

Property description and photos
Comparable sales data with adjustments
Market analysis
Final value conclusion
Appraiser's certification and signature

7. Delivery to Lender (Day 15)

The completed appraisal goes to your lender for review. You'll receive a copy within 3 business days, as required by federal law.

Total Timeline: The entire appraisal process typically takes 10-15 business days from order to delivery, though busy markets can extend this to 3 weeks or more.

What Happens When the Appraisal Comes In Low?

Approximately 8-10% of appraisals come in below the agreed purchase price. When this happens, you have several options:

Option 1: Renegotiate the Price

Ask the seller to lower the price to match the appraisal. In a balanced or buyer's market, sellers often agree to this, especially if they're motivated to close.

Example: You offered $450,000, but the appraisal came in at $430,000. You ask the seller to reduce the price to $430,000.

Option 2: Increase Your Down Payment

Bring more cash to the table to cover the gap between the appraised value and purchase price.

Example: With a $430,000 appraisal and $450,000 purchase price, you have a $20,000 gap. You could increase your down payment by $20,000 to make the deal work.

Option 3: Meet in the Middle

Negotiate a compromise where you both make concessions.

Example: The seller reduces the price by $10,000 to $440,000, and you increase your down payment by $10,000.

Option 4: Challenge the Appraisal

If you believe the appraisal is inaccurate, you can request a reconsideration of value (ROV). Provide additional comparable sales or evidence the appraiser may have missed. Success rates vary, but approximately 20-30% of ROVs result in value adjustments.

Option 5: Walk Away

If you have an [appraisal contingency](/blog/contingencies-explained) in your contract, you can withdraw from the deal and receive your [earnest money](/blog/earnest-money-explained) back.

How to Prepare for an Appraisal

For Sellers:

Clean and Declutter: A tidy home photographs better and creates a positive impression. This won't change the square footage, but it helps the appraiser assess condition.

Make Minor Repairs: Fix leaky faucets, patch holes, replace broken fixtures, and touch up paint. These small items cost little but demonstrate good maintenance.

Document Upgrades: Provide a list of recent improvements with dates and costs. New HVAC system? Roof replacement? Kitchen remodel? Give the appraiser receipts and permits.

Provide Comparable Sales: While appraisers do their own research, you can share listings of similar homes that sold for strong prices.

Ensure Access: Make sure the appraiser can access all areas, including attic, basement, garage, and outbuildings.

For Buyers:

Be Present (Maybe): Some buyers attend the appraisal, others don't. If you do, stay out of the appraiser's way and don't pressure them about value.

Review the Report Carefully: When you receive your copy, check for factual errors—wrong square footage, missing bathrooms, incorrect lot size, etc.

Understand Your Rights: Federal law gives you the right to receive a copy of the appraisal at least 3 days before closing.

Appraisal vs. Home Inspection: What's the Difference?

Many buyers confuse appraisals with home inspections, but they serve different purposes:

Appraisal:

Purpose: Determine market value
For: The lender
Cost: $300-$600
Duration: 30-60 minutes
Focus: Value, not defects
Required: Yes (for financed purchases)

Home Inspection:

Purpose: Identify defects and needed repairs
For: The buyer
Cost: $300-$500
Duration: 2-4 hours
Focus: Condition and safety
Required: No (but highly recommended)

You need both for a complete picture of the property you're buying.

Special Appraisal Situations

FHA Appraisals

FHA loans require more stringent appraisals that focus on safety and habitability. Appraisers look for issues like peeling paint (in homes built before 1978), handrail requirements, and property access. These appraisals often cost slightly more ($400-$700) and can take longer to complete.

VA Appraisals

VA loans require appraisers to certify that the property meets Minimum Property Requirements (MPRs). Issues like wood-destroying insects, defective paint, and safety hazards must be addressed before closing.

Refinance Appraisals

When refinancing, the appraisal process is similar but often faster since you already own the home. Desktop appraisals or automated valuation models (AVMs) may be used for straightforward refinances, reducing costs to $100-$200.

Investment Property Appraisals

Appraisals for rental properties may use the income approach in addition to the sales comparison approach, considering rental income potential in the valuation.

How Market Conditions Affect Appraisals

Appraisals rely on historical sales data, which creates challenges in rapidly changing markets:

Hot Markets: When prices rise quickly, appraisals may lag behind current market values because they're based on sales from 3-6 months ago. This leads to more low appraisals in competitive markets.

Declining Markets: Appraisals may come in higher than current market value if based on older, stronger sales data.

Low Inventory: When there are few comparable sales, appraisers may need to use older data or expand their search radius, potentially affecting accuracy.

Common Appraisal Myths Debunked

Myth 1: "The appraiser works for the buyer." Reality: The appraiser works for the lender and must remain independent and unbiased.

Myth 2: "Cosmetic improvements significantly increase appraised value." Reality: Fresh paint and new carpet help, but structural improvements (new roof, HVAC, foundation work) add more value.

Myth 3: "The appraisal and tax assessment should match." Reality: Tax assessments and market value appraisals use different methodologies and rarely align perfectly.

Myth 4: "All appraisers value homes the same way." Reality: Different appraisers may arrive at slightly different values (typically within 5-10%) based on their comp selection and adjustments.

Frequently Asked Questions

Q: How long is an appraisal valid? A: Most lenders accept appraisals for 90-120 days. After that, you may need an appraisal update or new appraisal.

Q: Can I use the same appraisal if I switch lenders? A: Sometimes. If you're within the validity period, your new lender may accept the existing appraisal, potentially saving you $300-$600.

Q: What if I disagree with the appraisal? A: You can request a reconsideration of value (ROV) by providing additional comparable sales data or pointing out factual errors in the report.

Q: Do appraisers consider pending sales? A: Appraisers primarily use closed sales data. Pending sales may be referenced but carry less weight since the final sale price isn't confirmed.

Q: How much does a second appraisal cost? A: A second appraisal costs the same as the first ($300-$600+), and there's no guarantee it will come in higher.

Q: Can sellers see the appraisal? A: Not automatically. The appraisal belongs to the buyer and lender. Buyers can choose to share it, but aren't required to.

Q: What happens if two appraisals give different values? A: Lenders typically use the lower value to determine the loan amount. Some lenders may order a third appraisal to resolve significant discrepancies.

The Bottom Line

The appraisal process is a critical checkpoint in your real estate transaction. Understanding what appraisers look for, how they determine value, and what to do when problems arise puts you in a stronger position as a buyer or seller.

Remember these key takeaways:

Appraisals typically cost $300-$600 and take 10-15 business days
Appraisers examine property condition, location, and comparable sales
Low appraisals affect 8-10% of transactions but are negotiable
Preparation matters—clean homes with documented upgrades appraise better
You have rights, including receiving a copy and challenging errors

Whether you're buying your first home or your fifth investment property, a thorough understanding of the appraisal process helps you navigate one of the most important steps toward closing.

Ready to Start Your Real Estate Journey?

Understanding the appraisal process is just one piece of successful [real estate investing](/blog/brrrr-strategy-guide). At HonestCasa, we provide the tools, education, and support you need to make informed decisions throughout your buying, selling, or investing journey.

Get started today and gain access to expert resources, market analysis, and personalized guidance for your real estate goals.

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Key Takeaways