Buying or selling a home in the U.S. involves many steps, and one of the most critical—yet often misunderstood—is the home appraisal. Whether you’re a buyer securing a mortgage, a seller preparing for closing, or a homeowner refinancing your property, the appraisal process can significantly impact the outcome of your transaction.
This guide breaks down everything you need to know about navigating the home appraisal process in the U.S.—what it is, how it works, what affects an appraisal’s value, and how to respond if things don’t go as expected.
What Is a Home Appraisal?
A home appraisal is an independent, professional assessment of a property’s market value. Conducted by a licensed appraiser, it provides an unbiased estimate of what the home is worth based on its condition, location, and recent comparable sales.
Appraisals are typically required by lenders before they approve a mortgage or refinancing. Lenders want to ensure the property is worth the amount being borrowed so they can recover their investment in case of default.
Why Are Appraisals Important?
The appraisal serves several key purposes:
- Protects the lender: Ensures the loan amount doesn’t exceed the home’s actual value.
- Protects the buyer: Prevents overpaying for a property.
- Affects the deal: An appraisal that comes in too low can delay or derail a transaction.
- Helps with pricing strategy: Sellers use pre-listing appraisals to set realistic asking prices.
- Supports refinancing: Determines eligibility and loan-to-value ratio for refi loans.
When Is a Home Appraisal Required?
Appraisals are typically required in the following situations:
- Mortgage Purchase Loans – For buyers using a mortgage, the lender orders an appraisal.
- Refinancing – Most lenders require an appraisal before approving a refinance.
- Home Equity Loans / HELOCs – Lenders may require an appraisal to assess the amount of available equity.
- Estate Settlements or Divorce Cases – Appraisals help determine fair property value.
How the Appraisal Process Works
The appraisal process generally includes these steps:
1. Appraisal Is Ordered
In a home sale, the lender initiates the appraisal after the buyer’s loan application is in process. The buyer usually pays for the appraisal as part of the closing costs.
2. Licensed Appraiser Is Assigned
The lender uses a third-party appraisal management company (AMC) to assign a certified appraiser. This helps avoid conflicts of interest.
3. Appraisal Inspection
The appraiser visits the property to:
- Inspect interior and exterior condition
- Measure square footage
- Note amenities and upgrades
- Assess health and safety issues
- Take photographs and verify layout
The visit usually takes 30 minutes to a few hours.
4. Comparative Market Analysis
The appraiser researches comparable homes (“comps”) sold recently in the same neighborhood. These must be:
- Similar in size, age, style, and condition
- Recently sold (usually within the past 3–6 months)
- Within close geographic proximity (typically within 1 mile in urban areas)
5. Final Report Issued
The appraiser compiles all findings into a Uniform Residential Appraisal Report (URAR). This includes:
- Property details
- Market conditions
- Comp analysis
- Final appraised value
The report is sent to the lender (and buyer, if requested).
What Factors Affect a Home’s Appraised Value?
Several elements can increase or decrease your home’s appraised value:
Location
- Neighborhood quality and desirability
- Proximity to schools, parks, and amenities
- Local market trends and crime rates
Size and Layout
- Square footage
- Number of bedrooms and bathrooms
- Open floor plans and modern layouts tend to be valued higher
Condition and Age
- Structural integrity and systems (HVAC, plumbing, roof)
- Recent renovations or upgrades
- Age of home and materials used
Curb Appeal and Lot Size
- Landscaping and exterior maintenance
- Driveway, fencing, garage, patio, etc.
Comparable Sales
- Recent sales of similar homes nearby are weighted heavily
- Appraisers make adjustments for differences in features or conditions
Appraisal vs. Home Inspection
It’s important to distinguish between a home appraisal and a home inspection:
| Appraisal | Inspection |
|---|---|
| Determines property value | Assesses property condition |
| Required by lenders | Optional (but highly recommended) |
| Focused on market and comps | Focused on defects, repairs, safety |
| Conducted by licensed appraiser | Conducted by certified home inspector |
Both are crucial, but they serve different roles in a real estate transaction.
How Much Does an Appraisal Cost?
The cost of an appraisal varies based on property type, size, and location, but typical costs are:
- Single-family home: $400 – $700
- Multi-family or large properties: $800 – $1500+
- Rural or unique homes: Higher, due to fewer comps
This fee is generally paid by the buyer during the mortgage process.
What Happens If the Appraisal Comes in Low?
A low appraisal (i.e., below the agreed purchase price) can create major complications. The lender won’t approve a loan for more than the appraised value.
Options if Appraisal Is Low:
- Renegotiate the Price
- Buyer and seller agree to lower the sale price to match the appraised value.
- Buyer Pays the Difference
- Buyer covers the gap in cash (e.g., if price is $300K but appraisal is $280K, buyer adds $20K).
- Challenge the Appraisal
- Provide additional comps or information to dispute inaccuracies.
- Request a Second Appraisal
- Rarely approved, but possible if errors or conflicts are clear.
- Cancel the Contract
- If appraisal contingency is included, the buyer can walk away without penalty.
Tips for Buyers Navigating the Appraisal Process
- Understand your rights: You are entitled to receive a copy of the appraisal.
- Review the report carefully: Look for errors in square footage, comp selection, or features.
- Be prepared for delays: Scheduling and processing appraisals can take 1–2 weeks or more in busy markets.
- Have extra funds available: In case the appraisal is lower than expected, you may need to cover the gap.
Tips for Sellers Preparing for an Appraisal
- Clean and declutter: Presentation matters—even to an appraiser.
- Highlight upgrades: Provide a list of recent improvements and dates.
- Improve curb appeal: First impressions influence appraisers just like buyers.
- Be present (but don’t hover): Be available to answer questions but give the appraiser space.
Can You Influence an Appraisal?
While you can’t legally influence an appraiser’s judgment, you can provide helpful information, such as:
- A list of recent upgrades (e.g., new roof, HVAC, kitchen remodel)
- Information about recent nearby sales the appraiser may not have seen
- Evidence of improvements that add value to the home
Always remain respectful and avoid pressuring the appraiser, which can violate federal lending regulations.
Appraisals for Refinancing or Home Equity Loans
When refinancing, the lender uses the appraisal to determine:
- Loan-to-value (LTV) ratio
- Eligibility for better rates
- Whether mortgage insurance (PMI) can be dropped
A higher appraisal can unlock better loan terms or more equity for borrowing.
What If You Disagree with the Appraisal?
If you believe the appraisal is inaccurate or incomplete:
- Request a Reconsideration of Value (ROV) – Submit supporting evidence, such as better comps or corrections to property details.
- Contact Your Lender – Ask if a second appraisal is allowed.
- Hire Your Own Appraiser – You can get an independent opinion, but your lender may not accept it for loan purposes.
Final Thoughts: Be Prepared, Not Surprised
The appraisal process may feel like a black box, but being informed and prepared can help you navigate it smoothly. Whether you’re buying, selling, or refinancing, the appraisal can either support or sink your transaction. Understanding how it works—and knowing what to do if something goes wrong—can give you a major advantage in today’s competitive market.