How Home Appraisals Work: A Simple Guide for Buyers & Sellers
When you are buying or selling a home, there is one step in the process that can feel confusing or even intimidating: the appraisal. Whether you are a first-time home buyer, a seasoned homeowner, or preparing to list your property, understanding how appraisals work can help you navigate the transaction with confidence.
Here is a clear and friendly breakdown of everything you need to know.
What Is a Home Appraisal?
A home appraisal is an unbiased estimate of a property’s fair market value. It is completed by a licensed appraiser and is required by lenders to make sure the home’s price aligns with its true value. The appraisal protects both the lender and the buyer from overpaying.
When Does the Appraisal Happen?
The appraisal typically takes place after the buyers and sellers sign a purchase agreement and the buyer’s lender begins the mortgage process. It usually happens before the inspection period ends or shortly after the mortgage application is submitted.
What Does an Appraiser Look At?
Appraisers do not guess or eyeball a value; they follow a detailed process. Here is what they evaluate:
- The Home Itself
- Square footage
- Number of bedrooms and bathrooms
- Age of the home
- Quality of construction
- Recent upgrades or renovations
- Condition of major systems such as roof, HVAC, foundation, plumbing, etc.
- The Property’s Features
- Lot size
- Garages, porches, decks
- Outdoor amenities such as pools, workshops, etc.
- Comparable Sales (Comps)
Appraisers compare your home to similar properties nearby that have sold recently (usually within the last six months). These comps help determine a realistic market value.
- Location
- School district
- Proximity to parks, shopping, dining
- Neighborhood condition and demand
- Road noise or surrounding development
How Long Does the Appraisal Take?
The physical visit typically takes about an hour, depending on the home. The appraiser’s report, known as the Appraisal Report, may take a few days to be completed and sent to the lender.
What Happens if the Appraisal Comes in Low?
A “low appraisal” means the home’s value is less than the agreed-upon purchase price.
This can feel stressful, but there are options:
- Buyers & Sellers Can Renegotiate
Often the seller may lower the price or both parties meet in the middle.
- The Buyer Can Bring Additional Cash
Buyers can choose to cover the difference between the appraisal and the purchase price out of pocket.
- A Reconsideration of Value
If there were mistakes or overlooked comparable sales, the agent can request a reevaluation.
- Cancel the Contract
Most purchase agreements allow buyers to walk away if the appraisal is too low.
Low appraisals happen for many reasons, including rising markets, unique features, or fast-changing conditions.
What If the Appraisal Comes in High?
Good news for the buyer! If the appraised value is higher than the purchase price, the buyer is essentially gaining instant equity. The price does not adjust upward; the contract price stays the same unless renegotiated by the buyer.
Who Pays for the Appraisal?
In most cases, the buyer pays the appraisal fee, which varies in cost depending on property size and location. This fee is usually collected upfront by the lender.
Tips to Help Sellers Prepare for an Appraisal
If you’re selling your home, here are simple ways to make a good impression:
- Make sure the home is clean and decluttered
- Complete small repairs such as loose knobs, peeling paint, etc.
- Provide a list of recent upgrades with receipts
- Ensure all areas of the home are accessible
- Improve curb appeal with simple landscaping
These small steps can help the appraiser see the home in its best light.
Why Appraisals Matter
The appraisal is a key part of the buying and selling process because it provides:
- Peace of mind
- Protection for the buyer and lender
- A fair, unbiased value estimate
- Confidence in the investment
Understanding how appraisals work helps you avoid surprises and ensures a smoother real estate experience overall.
