What Is a Home Appraisal? The Costs and Process Explained
A home appraisal is a professional estimate of a property’s current market value. If you’re financing a home purchase or refinancing a mortgage, your lender may require one to help determine whether the property’s value supports the loan. An appraiser evaluates the home along with relevant market data to arrive at an opinion of value.
Here’s what to expect from the home appraisal process, including how it works, what it costs and what happens if the appraisal comes in lower than expected.
- A home appraisal estimates a property’s market value. Lenders may use it to evaluate the home as collateral when you’re buying, refinancing or borrowing against your home equity.
- A typical home appraisal costs about $350 to $600, with a national average of $359. The borrower usually pays the fee even though the lender generally orders the appraisal.
- A low appraisal doesn’t automatically end a home purchase. Buyers may be able to renegotiate the price, cover the appraisal gap, request a reconsideration of value or use an appraisal contingency.
What is a home appraisal?
A home appraisal is an independent estimate of what a property is worth in the current market, prepared by a licensed or certified appraiser. Mortgage lenders use the value to help determine whether the property provides enough collateral for the loan.
The appraised value won’t always match the price a buyer and seller agreed to. If the appraisal comes in lower than the purchase price, it can affect financing and may require the parties to decide how to move forward.
How does a home appraisal work?
An appraisal may be part of the lender’s underwriting process when you’re buying a home, refinancing a mortgage or borrowing against your home equity.
Here’s how the home appraisal process typically works:
- The lender orders the appraisal. The lender arranges the appraisal through a third party.
- The appraiser researches the property and market. The appraiser reviews information about the property, local market conditions and comparable homes in the area.
- The appraiser assesses the property. When an in-person visit is required, the appraiser evaluates the home and notes characteristics that could affect its value.
- The appraiser completes the valuation analysis and report. The appraiser analyzes comparable sales and other relevant information, then documents an opinion of the home’s market value and the information supporting it.
- The lender reviews the valuation. During underwriting, the lender uses the appraisal to help determine whether the property provides sufficient collateral for the loan. For a home purchase, the lender also compares the appraised value with the purchase price.
Home appraisal vs. home inspection
A home inspection and a home appraisal can both be important parts of buying a home, but they serve different purposes.
| Home inspection | Home appraisal |
|---|---|
| Evaluates the home’s physical condition and may identify structural, safety or system issues | Estimates the home’s market value based on its characteristics, condition and comparable sales |
| Usually arranged and paid for by the buyer | Usually ordered by the lender, although the borrower typically pays the fee |
| May not be required, but can help buyers uncover costly or potentially dangerous problems | Typically required by mortgage lenders as part of the underwriting process |
How much does a home appraisal cost?
A home appraisal typically costs $350 to $600, with a national average of $359. The final price can vary based on the property’s size and complexity, the mortgage type, the home’s location and local demand for appraisers.
Appraisals for some government-backed loans may cost more because they must meet additional program requirements. For example, VA appraisal fees vary by location and property type.
Typical home appraisal costs
| Conventional | $350 to $600 |
| FHA | $400 to $700 |
| VA | $450 to $1,200 |
| USDA | $400 to $900 |
In most transactions involving a lender, the lender orders the appraisal, but the borrower usually pays the fee as part of their closing costs. That’s generally true whether you’re buying a home, refinancing your mortgage or borrowing against your home equity. If you’re buying a home without a lender and choose to get an appraisal, you’ll typically be responsible for ordering, scheduling and paying for it yourself.
What do home appraisers look for?
To estimate a home’s value, an appraiser evaluates the property and reviews recently sold homes with similar characteristics, known as “comparables” or “comps.”
An appraiser may consider:
- The home’s size and design, including square footage and number of bedrooms and bathrooms
- Overall condition, including maintenance and renovations
- Location and views
- Special features, such as an in-ground pool
- Recent sales of comparable properties
- Local housing market trends
If you’d like a more detailed look at the factors considered in an appraisal, review the Uniform Residential Appraisal Report, the form commonly used for residential appraisals.
What could cause a low appraisal?
A lower-than-expected appraisal may affect how much a lender is willing to lend, potentially complicating a home purchase or mortgage refinance.
These items can cause an appraisal to come in lower than expected:
- Deferred maintenance or significant property-condition issues
- Limited or unfavorable comparable sales
- Recent declines or shifts in the local housing market
- Improvements that add less value than expected
- A purchase price that’s higher than the home’s supported market value
- Errors or omissions in the appraisal report
It’s illegal for an appraiser to consider your race or the racial makeup of your neighborhood when determining a home’s value. Still, discrimination and bias can occur in the appraisal process. A LendingTree survey found that Black homeowners were more likely than white homeowners to believe their home was unfairly appraised and that discrimination played a role.
If you believe an appraisal contains errors, inappropriate comps or evidence of bias, raise your concerns with your lender. You may be able to request a reconsideration of value (ROV). If your concerns aren’t resolved, you can also file a complaint with the lender’s federal regulator, often the Consumer Financial Protection Bureau.
5 home appraisal tips
Some factors that influence an appraisal are outside a buyer’s or seller’s control, but there are steps both can take to prepare for the process:
- Buyers: Make a realistic offer. Offering far above the asking price can create financing challenges if the appraisal comes in lower than the purchase price. Work with an experienced real estate agent when deciding how much to offer.
- Sellers: Improve curb appeal. Basic upkeep, such as mowing the lawn, trimming hedges and tidying the exterior, can help present the property well for the appraisal visit.
- Sellers: Document home improvements. Gather records of additions, renovations and upgrades to provide the appraiser with information about work completed on the property.
- Sellers: Take care of minor repairs. Address obvious maintenance issues, such as leaky faucets, damaged paint or burned-out light bulbs, before the appraisal.
- Sellers: Clean and declutter. A clean, accessible home makes it easier for the appraiser to inspect the property and assess its features and condition.
Why do you need an appraisal?
Lenders commonly use appraisals when underwriting a loan, but mortgages aren’t the only reason you might need one. Here’s why you need an appraisal:
- Buying a home. Lenders commonly require an appraisal to evaluate the property as collateral and calculate your loan-to-value (LTV) ratio. If you’re paying cash, an appraisal generally isn’t required, but it can provide an independent opinion of value before you buy.
- Selling a home. An up-to-date appraisal can help you set an asking price and support negotiations. If the buyer is financing the purchase, the buyer’s lender will typically order the appraisal as part of the mortgage process.
- Refinancing a mortgage. An appraisal helps the lender determine whether the home’s value supports the new loan.
- Borrowing against your equity. If you’re applying for a home equity loan, HELOC or cash-out refinance, an appraisal can help determine how much equity is available to borrow against.
- Death or divorce. An appraisal can help establish a property’s value when you need to divide or transfer assets.
- Disputing a tax assessment. An appraisal may provide evidence of your home’s value if you challenge a local property tax assessment.
- Filing for bankruptcy. An appraisal can help establish the home’s fair market value during bankruptcy proceedings.
Buying and selling a home: What happens after a home appraisal?
After the appraisal, the lender reviews the report as part of underwriting. What happens next depends largely on how the appraised value compares with the purchase price.
If the appraisal matches or exceeds the purchase price
If the appraised value matches or exceeds the purchase price, the transaction can usually move forward without affecting the buyer’s financing or the amount of cash needed upfront.
However, an appraisal above the purchase price doesn’t necessarily mean the buyer got a bargain. The appraisal estimates market value, not a guarantee of what the home will ultimately be worth.
What happens if the appraisal is lower than the purchase price?
A low appraisal can complicate the transaction because the lender bases its underwriting on the appraised value, not simply the agreed-upon purchase price.
Depending on the purchase agreement and the buyer’s finances, the parties may have several options:
- Negotiate a lower purchase price. The buyer may ask the seller to reduce the price to better align with the appraised value.
- Cover the appraisal gap. The buyer may contribute more cash to make up some or all of the difference.
- Request a reconsideration of value. If the buyer believes the appraisal is inaccurate, they may be able to request an ROV through the lender.
- Use an appraisal contingency. If the purchase contract includes one, the buyer may be able to cancel the transaction if the appraisal comes in too low.
For the seller, a low appraisal may mean agreeing to a lower price, negotiating another solution with the buyer or risking the deal falling through.
What refinancing homeowners should know about appraisals
A refinancing appraisal generally works much like one for a home purchase, but it doesn’t always require a traditional in-person appraisal. Depending on your loan and property, your lender may use a desktop or hybrid appraisal or waive the appraisal requirement altogether.
If you have a conventional loan
Your lender may be able to waive the appraisal requirement through Fannie Mae’s Value Acceptance or Freddie Mac’s Automated Collateral Evaluation (ACE). If your property is eligible, an appraisal waiver could save you time and money during the refinance process.
If you have an FHA loan
You may be able to refinance without an appraisal through the FHA streamline program.
If you have a VA loan
You may be able to use an interest rate reduction refinance loan (IRRRL) without getting a new appraisal.
If you have a USDA loan
Eligible rural homeowners may be able to refinance without an appraisal through the USDA Streamlined Assist Refinance program.
A low appraisal may limit how much you can borrow or leave you without enough equity to qualify for the refinance you want. Use LendingTree’s refinance calculator to estimate your monthly payments after refinancing.
How to dispute a home appraisal
If you believe an appraisal is inaccurate because the appraiser overlooked important property information, used inappropriate comparables or made other errors, you can ask your lender about a reconsideration of value. An ROV asks the appraiser to reevaluate the original analysis based on additional information or identified deficiencies.
The process may look like this:
- Review the appraisal report. Look for factual errors, missing information or questionable comps. For a first-lien mortgage, you have the right to receive a free copy of the appraisal and other written valuations. Your lender generally must provide it promptly after completion and no later than three days before closing.
- Gather supporting market information. Collect relevant comparable sales or other market data that may support a different valuation.
- Document other relevant property information. Provide evidence of features, improvements or upgrades that may have been overlooked, along with permits or other supporting records when available.
- Contact your lender. You generally request an ROV through the lender rather than contacting the appraiser directly. Your lender can explain its process and what information you’ll need to submit.
A broker price opinion is another way to estimate a home’s likely market value, but it isn’t the same as an appraisal and may not be accepted in the same situations.
| Appraisal | Broker price opinion |
|---|---|
| Completed by a licensed or certified appraiser | Completed by a real estate broker or agent |
| Provides an opinion of the property’s market value | Estimates the property’s probable selling price |
| Typically includes a more formal and detailed valuation process | Generally provides a shorter analysis based on the property, market and comparable sales |
| May be required by a lender | May be accepted in some situations, depending on the lender and transaction |
A BPO may cost less than an appraisal, but the two aren’t interchangeable. Check with your lender to find out whether a BPO is permitted for your transaction.
Frequently asked questions
Yes, in some cases. Eligible conventional mortgages may qualify for an appraisal waiver, meaning the lender can use available property data instead of requiring a traditional appraisal. Fannie Mae and Freddie Mac offer appraisal-waiver options for qualifying loans and properties. Some streamlined refinance programs may also allow borrowers to refinance without a new appraisal.
The appraisal process typically takes from a few days to a few weeks. While the property assessment itself may take only a couple of hours, the overall timeline depends on factors such as the appraiser’s availability, the complexity of the property and the time needed to prepare the report.
Not always. Some appraisals include an in-person visit, but lenders may also use desktop or hybrid appraisals in certain situations. These approaches allow the appraiser to evaluate the property using remotely collected data and information from reliable third-party sources.
How long a home appraisal remains valid depends on the loan type:
- Conventional loans: 12 months, but an update is required after 120 days
- FHA loans: 180 days
- VA loans: Six months
- USDA loans: 180 days
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