Bob Musinski has written about a variety of financial-related topics – including personal and business loans, credit cards and personal credit – for publications such as U.S. News and World Report. He has worked as an editor and reporter for multiple.
Bob Musinski ContributorBob Musinski has written about a variety of financial-related topics – including personal and business loans, credit cards and personal credit – for publications such as U.S. News and World Report. He has worked as an editor and reporter for multiple.
Written By Bob Musinski ContributorBob Musinski has written about a variety of financial-related topics – including personal and business loans, credit cards and personal credit – for publications such as U.S. News and World Report. He has worked as an editor and reporter for multiple.
Bob Musinski ContributorBob Musinski has written about a variety of financial-related topics – including personal and business loans, credit cards and personal credit – for publications such as U.S. News and World Report. He has worked as an editor and reporter for multiple.
Contributor Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
Chris Jennings Loans & Mortgages EditorChris Jennings is a writer and editor with more than seven years of experience in the personal finance and mortgage space. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. His work has been featured in a n.
| Loans & Mortgages Editor
Updated: Nov 1, 2023, 6:51pm
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When sellers and buyers agree on the price of a home, it’s a done deal, right?
Not until the appraiser weighs in.
Unless it is a cash-only home purchase, an appraiser is an impartial third party who can confirm or complicate the deal by providing an evaluation of the home’s value. Lenders rely on professional home appraisals to determine whether the home is at least equal to the value of the agreed-upon price.
A home appraisal is a value analysis of your property from a certified or licensed appraiser hired by the lender during the home purchase or refinance process.
The lender needs an accurate appraisal of the property because it is providing a mortgage loan and wants to make sure it isn’t giving too much money to the buyer. The appraisal is also important to the buyer and seller because an appraisal value that comes in lower than the agreed-upon price could prompt a buyer to reopen price negotiations.
An appraiser typically evaluates the property–exterior and/or interior–conducts research and addresses any special requests from the lender.
A buyer pays the cost of the appraisal, which is usually several hundred dollars.
The appraisal takes place as early as possible after the two parties agree on a price, to allow enough time to schedule a property visit and production of the report. A lender will select a home appraiser who will contact the seller to set a time and date for a home visit.
A uniform residential appraisal report—which generally resembles this template from Fannie Mae, a government-sponsored company that backs many mortgages—usually relies on these factors:
An appraisal inspection. Traditionally, appraisers review both the exterior and interior of a home to make sure it is in good structural shape, to confirm there are no safety issues, to make note of the number of rooms and to see if there have been major upgrades since the last real estate transaction. The appraiser usually takes photos of the various parts of the home during the walk-through. The appraiser handles the home visit individually, but homeowners might be present, especially if they are still living in the home. Buyers can request to be present, although it’s not common.
Appraisal visits for government-backed loans can differ from those for conventional loans. For example, an appraiser who is compiling a report for an FHA-backed loan needs to test utilities and appliances to make sure they are in working order, per government rules. VA loans have a similar list of requirements for an appraisal.
Concerns about the coronavirus have changed the appraisal process, at least temporarily. For example, the appraiser might be allowed to do an alternative appraisal, which could rely on an exterior inspection combined with photos and/or videos of the interior of the home from the seller.
Research. An important part of the appraiser’s value determination is the price of comparable homes sold recently in the property market. The most relevant ones have many of the same characteristics as the home in question and are in the neighborhood or one nearby.
To get comparative information, appraisers typically review government records as well as home sale information from the Multiple Listing Service (MLS). MLS is a real estate database that includes home listing and sales information posted by real estate professionals. Although the database is technically private, much of the information is available online for free.
Valuation approach. The appraiser could decide that the sales comparison approach is the most appropriate way to assess value or could take a cost-based approach, which is an estimate of what the cost would be to build the home today combined with the value of the land.
Home appraisals are different from home inspections because they are conducted to determine the value of a home for the benefit of the lender. Home inspections are focused on the buyer’s interests and the home repairs needed before completing the purchase.
During the closing process, the buyer will find and hire a home inspector, who will conduct a thorough review of each part of the home, develop a detailed report covering the interior and exterior and make recommendations about what might need to be fixed or updated.
After the home inspection, it is up to the buyer and the buyer’s real estate agent to bring up any concerns found during the home inspection. Repairs could be made or paid for by the seller, or the two sides could negotiate compensation for the buyer to fix any issues after move-in. The home inspection does not involve lenders at all, unless the buyer decides to cancel the sales contract because of the results of the inspection.
The typical home appraisal cost is $500, according to the 2023 Appraisal Survey from the National Association of Realtors. However, actual costs can vary widely and depend on a number of factors, including the size of the home and the metropolitan area its located in.
The NAR surveyed more than 2,500 of its members and found appraisal costs that broke down as follows:
If an appraiser will be at your home for an on-site inspection, plan for anywhere from one to three hours for this visit. In some cases, lenders may only require a drive-by appraisal, in which case the appraiser will view the exterior of a home and take photos without needing to come inside.
Once the appraisal is complete, it could take at least two weeks to receive the report. The NAR 2023 Appraisal Survey found the median time was 11 calendar days although nearly half of reports were received within 10 calendar days.
Survey respondents reported the following wait times in calendar dats to receive a completed appraisal report from a lender:
The size and complexity of a home as well as an appraiser’s workload may impact wait times.
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