What is a home appraisal, and how much will it cost you?

• A home appraisal is a report that states how much a home is worth according to a licensed professional.
• The appraiser looks for any safety issues, as well as at the location and size of the home.
• An appraisal typically costs $313 to $420, according to HomeAdvisor.
• Read more of Insider’s mortgage coverage here.

When you apply for a mortgage to buy a home, the mortgage lender requires the home to undergo an appraisal. A licensed appraiser will visit the home you plan to buy, then determine the value and provide the lender with necessary information.

What is a home appraisal?

A home appraisal is a report by a professional that states how much a property is worth.

A lender wants the home to have an appraisal so the company can decide whether to officially approve you for a mortgage. It may decide to not give you a mortgage if the appraiser’s report declares that the home is worth significantly less than what you’ve agreed to pay and plan to borrow. If you default on your mortgage payments later, the lender would sell the home to cover remaining expenses — but it wouldn’t earn enough money from the sale if you borrowed more than the home is worth.

The appraisal may also protect you if you have an appraisal contingency in your contract with the seller. The contingency may state that you can back out of the deal with your deposit or ask the seller to lower the price if the appraisal comes back saying that the home is worth less than a certain amount.

Home appraisal vs. home inspection

A home appraisal benefits both you and the lender, while a home inspection is solely for your benefit.

Home appraisers assess the value of a home. An inspector won’t make notes about the value, but they’ll tell you about the condition of the home so you know about any major or minor flaws.

An appraisal takes place when you apply for a mortgage, and if it shows the home is worth significantly less than the listing price, then the lender may decide not to give you a loan. 

An inspection takes place after the seller has accepted your offer, but before closing.

How does a home appraisal work?

Your lender does not perform the appraisal — a licensed professional independent of the lender does. The lender will usually schedule the appraisal, though.

In many cases, the appraiser goes to the home to walk around the property and throughout the home. There have become some exceptions since the beginning of the coronarvirus pandemic, though. A lender may allow a desktop appraisal that an appraiser can do from a computer by looking at tax records and floor plans. Or you could have an appraiser only look at the exterior of the home, and they will probably use additional data to finish their assessment.

It takes around a week from the time the lender schedules the appraisal to the time the appraiser finishes their walk-through. An appraiser may spend up to a few hours in the home if they visit in person, and the larger the property, the longer an appraisal takes.

What does an appraiser look for?

When the appraiser visits the home, they will look at the following aspects to determine the value:

• Interior: Is the home safe to live in, and are any parts of the walls, windows, or floors broken? They will check for water damage, infestations, and any issues with the HVAC system.
• Exterior: They will look at the roof, chimney, siding, deck, and porch.
• Location: The appraiser will look at the values of nearby homes. They will also see what schools and businesses are nearby and consider the crime rate.
• Size: How many square feet is the home (including the garage, attic, or basement), and how many rooms are there?
• Home improvements: If the seller made any upgrades to the home in the past few years — especially energy-efficient improvements to the roof, windows, insulation, or other features — the home could be worth more.

If you are getting an FHA, VA, or USDA mortgage, the appraiser will make sure the property meets the specific standards required for that type of home loan.

How much does an appraisal cost?

According to data from HomeAdvisor, a typical home appraisal costs $313 to $420. The larger a home or property is, the more the appraisal will cost.

The appraisal is usually more expensive for an FHA, VA, or USDA mortgage than it is for a conventional mortgage. Your property needs to meet certain standards for you to qualify for one of these mortgages, so the appraiser has to look for specific things.

As the buyer, you usually pay for the appraisal. It’s possible to negotiate with the seller so that they cover the cost, though.