Home appraisals are a critical part of the home-lending process, both for purchase mortgages and refinances. Here, we delve into exactly what an appraisal is, how it works and how it can impact your home loan.

What is a home appraisal?

A home appraisal is an objective, professional assessment done by a licensed appraiser to determine how much a property is worth.

A mortgage lender will require one to determine the value of the home — and whether the sale price is in line with its market value. Since the home serves as the borrower’s collateral, the accuracy of the appraisal matters significantly: If your home is appraised for less than expected, it can cost you money and potentially delay, or even derail, the entire transaction.

Likewise, when a homeowner is refinancing their mortgage, the lender will have the home appraised to confirm its market value before extending a new loan.

Home appraisal vs. home inspection

It’s easy to confuse home appraisals with home inspections — both involve an outside professional evaluating the home in person. However, there’s an important difference between the two.

• Appraisal: An appraisal estimates the value of the home as a dollar amount. It’s required by mortgage lenders, primarily as a security measure — to ensure they’re not loaning you more than the house is worth.
• Inspection: A home inspection, however, assesses the physical condition of the home. This is not a lender requirement, but it’s standard procedure for homebuyers. A home inspector looks at the property’s structure and major systems to evaluate for safety and functionality. Homebuyers often use inspection results as a negotiating tool, asking sellers to cover the cost of needed repairs.

The home appraisal process

Once an order from a lender has been received, a licensed third-party appraiser will make an appointment to visit the home (though some appraisals might be performed remotely).

In addition to this physical evaluation of the condition of the property, the appraiser also analyzes recent sales of comparable properties in the area, or “comps.” This information might be gathered from a variety of sources, such as the local multiple listing service (MLS), tax records, local real estate agents and county court records.

The appraiser also considers the neighborhood surrounding the property: The condition, style and sale prices of other homes in the neighborhood will affect each home’s value.

Here’s a step-by-step overview of how the process works:

1. Your lender orders the appraisal: If you’re buying a home, your lender will order an appraisal after your offer has been accepted and you’ve signed the purchase agreement. If you’re refinancing, they typically order the appraisal after you apply for the new loan.
2. The appraiser visits the home: The appraiser will conduct a careful inspection to determine the characteristics and condition of the property, often taking measurements and extensive notes. An in-person visit for a modest home might take just 30 minutes; a larger home might take several hours.
3. The appraiser reviews comps: Along with inspecting the property, the appraiser will conduct a market analysis and review public records to determine what similar properties have sold for, and how those relate to your home’s value.
4. The appraiser delivers a report and valuation: Once the information has been gathered, the appraiser will put together a report, typically the Uniform Residential Appraisal Report, for the lender. As the borrower, you are entitled to a free copy of this report before the loan closes. Read it thoroughly and check to make sure everything about the physical and locational characteristics are correct. Notify your lender if you believe it contains any inaccuracies or errors.

What do home appraisers look for?

Appraisals are based on a lot of factors, some of which might not have anything to do with the house itself. For example, if a neighborhood has a lot of distressed home sales, that tends to lower the value of other nearby homes, no matter how nice they are.

Here are some of the main factors an appraiser may consider when determining a home’s value:

• Location
• Neighborhood 
• Accessibility and proximity to transportation
• School district
• Square footage (of both the house and the lot)
• Layout
• Hazards (such as flood dangers)
• Age and condition of the foundation, roof, walls and overall structure
• Amenities, such as a fireplace, deck or swimming pool
• Condition of appliances
• Sales trends and price ranges for comparable homes in the neighborhood
• Real estate taxes as compared to comparable properties
• Homeowners association fees as compared to comparable properties

If the appraisal is lower than expected

A lower-than-anticipated home appraisal can spell trouble for a sale — just as you don’t want to pay more than you have to, lenders don’t want to risk more than a home is worth.

It’s common for homebuyers to build a contingency into their contract in the event of a low appraisal. That way, if the appraised value comes in lower than the amount you’ve agreed to pay, you would likely be able to back out of the deal and get your earnest money deposit refunded.

Alternatively, you might try to negotiate with the seller for a price closer to the appraised value. If you still want the house and the seller is unwilling to negotiate, you may have to put more money toward the down payment to make up the difference.

If you’re getting the appraisal as part of a loan refinance, you might still be able to refinance by offering to make up the difference. You may also consider asking for a second opinion, especially if you think the first appraiser made any factual errors.

Home appraisal tips

Appraisers need to be objective: You won’t have much, or any, influence over their findings. But there are some things you can do to be prepared. 

For homebuyers

• Know your contingencies: Make sure you have the right contract contingencies in place so that if the valuation isn’t in line with your expectations, you can walk away safely. Your real estate agent can help with this.
• Don’t feel pressured to make a higher offer: A competitive market can make it tempting to offer more than asking price. Don’t go overboard if you don’t have the extra cash to cover the difference between a higher offer and the actual appraised value.

For refinancers

• Make a list of improvements: Get maximum credit for renovations or repairs you’ve done by providing details about work completed on the property. Tell the appraiser what you did (i.e., added a garage), when you did it and how much you spent, and provide photos and receipts if possible.
• Clean and declutter: A good first impression helps — before the appraiser comes to your home, put in some effort to make it look its best by tidying up and stashing clutter out of sight. Maximizing your curb appeal by mowing the lawn, raking leaves and cleaning up flower beds couldn’t hurt, either.

FAQs

• How much does a home appraisal cost?
  

  The cost of a home appraisal typically ranges from $314 to $424, according to 2026 data from Angi. The amount may vary a bit higher or lower depending on the home’s size and location.

• Who pays for the home appraisal?
  

  While the lender is the one who requires and orders the appraisal, the borrower is the one who pays for it — it’s considered one of a real estate transaction’s standard closing costs.