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Home Appraisal 101

WHO: Anyone buying, selling, or refinancing a home needs a home appraisal, which is conducted by an certified or licensed, third-party appraiser. All 50 states require licensing, but this requirement varies from state to state.  

WHAT: A home appraisal is an assessment of a home’s value whose cost is covered by the borrower as part of the closing costs. It is an upfront, out-of-pocket, non-refundable expense. Total costs run between $200-$600, with the national average running $336.. 

WHEN: Home appraisals occur before a home closes, in the case of buying or selling, or before a loan is approved, in the case of refinancing.

WHY: The primary goal of a home appraisal is to protect the lender, in the case of a refinancing, by assuring the loan does not exceed the home’s value. Appraisals are also helpful in determining if a home’s contract price is appropriate. 

HOW: This value is determined by a visual inspection of the home and property; comparison to similar comps in the same neighborhood; current market trends; and the home’s condition, location, and amenities. 

How an Appraiser Determines Home Worth

When assessing a property to determine value, an appraiser considers:

  • Neighborhood

  • Local housing market

  • Comps in area

  • Lot and home size

  • Age and style of home

  • Type of exterior (brick, wood) and interior materials (plaster, drywall)

  • Appliances and amenities (fireplace, porch, pool)

  • Overall condition of home and property

  • Structural integrity of home and property

  • Any improvements or renovations

  • Health and safety concerns

Interior considerations include:

  • Number of bedrooms and bathrooms

  • Amount of living space/square footage

  • Condition of electrical and plumbing

  • HVAC system type and condition/age

  • Presence of lead paint (if home was built before 1979)

  • Built-in appliance age

  • Type of basement, attic or crawl space

  • Evidence of termites or other pests

  • Materials and condition of walls (plaster vs. drywall), floors (tile, hardwood, concrete, etc.), windows (double hung, combination storm and screen, etc.)

  • Upgrades and renovations

  • Energy-efficient features

Exterior considerations include:

  • Size of property

  • Roof and foundation condition

  • Chimney condition

  • Curb appeal

  • Landscaping 

  • Type of garage (attached vs. detached)

  • Driveway and sidewalk condition

  • Outbuildings (shed, pool house, etc.)

  • Outdoor amenities (pool, hot tub, etc.)

Home Appraisal vs. Home Inspection

While similar in nature, a home appraisal is different from a home inspection, which is a basement-to-attic assessment of a property’s condition that takes into account structural (e.g., foundation and roof), mechanical systems (e.g., electrical and plumbing), and overall state of a home and property. A home appraisal looks at multiple factors, including a home’s condition, to determine the home’s value, or how much the property is worth.    

Both home inspections and home appraisals are conducted by an unbiased third party inspector who has no association with the buyer, seller, or lender, per federal regulation. 

A home inspection yields a list of repair recommendations. This list can be a useful negotiation tool for the buyer. An appraisal does not result in recommendations for repair.  

 

For more information on appraisals, visit the Aksarben Mortgage resource page here.  And if you are looking to buy a new home or are taking advantage of the near-historic low interest rates, we’ll be happy to discuss the many mortgage options available to you today.  Contact us and get ready to Experience Your Good Life. 


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.