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A home appraisal is conducted by a licensed professional to determine what your home is worth before you put it on the market and sell it. The process could cost several hundred dollars, depending on factors such as property size and location.
How does a home appraisal work?
The appraiser looks at a number of factors, including comparable homes within the local market, location, age and condition of the home, structural construction and materials, size of the home and square footage, updates and improvements, style, curb appeal, the economy and local market.
Under federal and state law, appraisals are required to be independent and objective. An appraiser will conduct a visual inspection of the home and look at recent home sales in the area, known as comparables or “comps.” Based on the information gathered, the appraiser will determine the home’s value.
With rare exceptions, mortgage lenders always require appraisals both for home purchases and when a homeowner refinances a mortgage.
Why is an appraisal needed?
An appraisal benefits both the homeowner and potential buyer.
“An appraisal is always in the best interest of the buyer as it will assess the value of the property and help the buyer have confidence in the purchase price of the home,” Boies says.
A property appraisal is also important for the homeowner or potential buyer because it establishes the parameters of the mortgage loan.
“Once the value of the home is established through the appraisal, the lender can make an offer based on the available loan-to-value ratio,” McClary says. “Property appraisals also help determine the cost of the loan. A well-maintained property can lead to a loan with a more favorable interest rate than one that is in disrepair because of the direct effect on loan-to-value ratio.”
How much does a home appraisal cost?
A typical, single-family home appraisal ranges from $300 to $450, though that can vary depending on a number of factors including the size of the home, the value of the property, condition of the property and the level of detail involved in the appraisal. A large home or property will usually be more expensive to have appraised. In larger cities or areas with higher living costs, the range could be $500 to $800 or more.
A professional appraiser’s fees are regulated in part by the Dodd–Frank Wall Street Reform and Consumer Protection Act and must be reasonable and customary for the geographic market.
What factors influence the home appraisal cost?
- Property size: It generally costs more for an appraiser to assess a larger property.
- Repairs: Expect to pay more for an appraisal of a home with extensive damage, because that will require extra effort on the appraiser’s part.
- Amount of comps: If the home is isolated or has unusual features and there are fewer similar properties, the appraiser might charge more for the additional time it will take to evaluate.
- Seasonal conditions: You might be charged more at specific times of year if conditions make it more challenging for the appraiser to access the property.
Home inspection vs. home appraisal
Unlike an appraiser, the home inspector’s goal is to evaluate the home for signs of damage or issues. An appraiser might assume the dishwasher is working if it’s not leaking, for example, but a home inspector would run it to confirm it functions properly.
Appraisals and inspections have some similarities, though, including that they take into account the condition of the home. Both services can cost about the same, too.
Who pays for a home appraisal?
The appraisal fee is typically paid by the homebuyer. The appraisal is usually ordered by the buyer’s mortgage lender.
Under federal regulations, neither the buyer nor the seller can choose the appraiser themselves. The lender is also prohibited from having a relationship with the appraiser so that there is a fair, unbiased valuation of the home.
How do you find an appraiser?
Ask your real estate agent for a recommendation. Make sure that your appraiser has experience doing appraisals for home sales, and that the appraiser is familiar with your property type specifically. The government maintains a national registry where you can verify the appraiser’s credentials.