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Chapter 3
Getting a Home Appraisal: What You Need to Know

You now have a good understanding of how the home selling process works and how to get started all on your own. But there are a few more important steps to completely finishing your sale. One important step in the house selling process is the home appraisal. However you're planning to sell your home, you will need to get an official home appraisal from a third party to completely finalize a sale. How does a house appraisal work? We'll walk you through the ins and outs of home appraisals, so you can be ready for this step.

What Is a Home Appraisal?

A home appraisal is an official report from a third-party licensed appraiser on the value of your home. The appraiser will compile data on comparable homes, the property itself, and the appraiser's own judgment on the home. At the end of the appraisal, the appraiser will provide an official value report on your home for the buyers. This appraisal amount may or may not line up with the asking price, which could create an appraisal gap.

What's the difference between a home appraisal and a home inspection? A home inspection is much more in-depth than an appraisal, in general, and has a slightly different purpose. An inspector will look to see if your home needs repairs and what those repairs might be while an appraiser looks for the value of the home. An appraiser will take a variety of factors into account, but an inspector will actually test things like the outlets, the furnace, and the roof to make sure they're all stable and installed correctly. An appraiser won't look for any specific problems but just try to assign a value to the property.

How Much Does a Home Appraisal Cost?

While an appraisal is necessary, it's also not free. The national average for the cost of a home appraisal is $339, and most home appraisal costs will range from $300-$400. The exact cost of your appraisal will depend on where you live. Home appraisals in some metropolitan areas can cost as much as $600, so you'll want to see what your area typically costs for an appraisal. Your appraisal costs can also vary depending on the property. Large properties or complex properties can also have higher appraisal fees - some going as high as $1,000.

The good news is that in many cases, the buyer will pay for the appraisal. Appraisals are designed to protect the buyer, and most mortgage lenders will have them pay for the appraisal. So while $400 might seem like a lot to pay for an appraisal, you probably won't have to be the one to pay for it.

What Will the Home Appraiser Look For?

Appraisals are done through a third party, not your mortgage lender. Your lender may help arrange for the appraisal, but ultimately, somebody else will come and perform it. When the appraiser comes to your property, what are they looking for?

  • The Condition of the Home & Property. When an appraiser looks at your home, they're not necessarily looking at the paint on the walls or the electrical outlets. Instead, they're going to count the number of bedrooms and bathrooms, see what rooms have windows, look at the HVAC cooling and heating system, and get a general sense for what the condition of the house is. An appraiser will make sure someone can reasonably and safely live in the home.
  • Upgrades. If your home has improvements, that will be taken into the appraisal. The improvements or upgrades need to be permanent to the house. If you could take them with you when you move, they won't count as an improvement and increase the appraisal price. Some upgrades might include a finished basement, a pool, a fireplace, a deck, or an expanded garage.
  • Neighboring Homes. An appraiser is going to look through public records of other homes near yours and similar homes to yours before determining a value. The location is a big factor in the value of a home, so your neighors' homes will determine some of the value of yours.

Once the appraiser has weighed the value of your home based on all of these factors, they'll give an official number for the home. That number will be the appraisal value of your home, and it will be reported to your lender and buyers.

How Long Does the Home Appraisal Take?

The actual appraisal itself might take anywhere from 15 minutes to several hours. Because of the pandemic, shorter appraisals have become more common, and multiple-hour home appraisals are much rarer. But the appraisal isn't the only thing that will take time - the process will as well. Setting up the appraisal and getting the result can take anywhere from a few days to a few weeks. The timing will depend on the type of appraisal your mortgage lender requests, where you live, current demand, and the laws in your area.

Tips for Sellers

The appraisal can actually make or break your sale. As unfortunate as it is, if you don't have a cash offer or an agreement that the appraisal won't affect your sale, your potential buyers can back out of the offer if the appraisal value comes in lower than what they agreed to pay. While you can't change the appraisal amount, you can prepare to help make it possible for your appraiser to value your house for what it's worth. Here are some tips for sellers with home appraisals.

  • Clean Your House. You can't change how many bedrooms are in your home, but you can make your house look as good as possible. Clean the countertops and tables, make sure all the lightbulbs are bright and fresh, hang mirrors to reflect light, and even more furniture away from the walls to make your rooms looks more spacious. These little tips can make your home look welcoming and bright when the appraiser comes.
  • Provide a list of Offers. If you have more than one offer on your home, show a list of the offers to the appraiser. Having multiples offers can show that the price you listed your home for is a fair and good price. While it may not change the outcome of your home appraisal, it's worth showing that the price you determined is good.
  • Provide Comparable Homes. Showing the appraiser similar houses that sold for similar prices can also help show that the price you listed was fairly accurate.
  • Attend the Appraisal. In most situations, you're allowed to attend the appraisal and point out the upgrades in your home as you go. If you're present for the appraisal, then you can make sure the appraiser doesn't miss any important details - like the new cabinets or flooring you just put in.

What Happens After the Home Appraisal?

After the home appraisal, you'll be able to see if your asking price lines up with the appraised value. If it does, you're good to go through with the sale, and the buyer will most likely be ready to move forward as well. If your appraisal value doesn't match, it doesn't mean that the buyer will always back out. There are a few things that might happen in this situation:

  • The buyer will cover the difference
  • The buyer will ask you to cover the difference (or part of the difference)
  • The buyer or seller will contest the appraisal

If the buyer covers the difference, that's great! If they ask you to cover it, you can decide what would be best. If you have a different buyer who will cover the difference, you can move forward with that other buyer. If you don't have many options, you may decide it's best to pay the difference in order to secure a sale. To contest the appraisal, you will need to provide evidence that the appraiser missed key parts of your property, didn't come inside to inspect the home or other details that would mean the appraised value is incorrect.

Nervous about the home appraisal process? Take our seller quiz to get the support you need as you sell your home!