How Much Does A Home Appraisal Cost?

How Much Does A Home Appraisal Cost?
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A home appraisal is typically a required part of the mortgage application process, whether you’re buying a new home or refinancing. This is because the lender wants to make sure they can get their money back by selling the home if you fail to make your payments.

If you’re wondering how a home appraisal works and what it will cost, here’s what you should know.

What Is a Home Appraisal?

A home appraisal is an unbiased opinion of a home’s value from a certified or licensed home appraiser. Lenders generally require an appraisal to be performed during the mortgage process so they can properly judge the risk of approving your application. Note that while the lender will typically order an appraisal, the home buyer will foot the bill.

Because the home will be collateral for the mortgage, the mortgage lender wants to make sure they’re not giving you more money than what the home is worth. This way, they’ll have a reasonable chance to sell the home and recoup their costs if you default on the loan.

In some cases, a lender might be willing to waive the home appraisal requirement—such as if the home was recently appraised or if you’re refinancing a loan backed by the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) or Department of Veterans Affairs (VA). But these exceptions are rare for conventional loans.

How Does a Home Appraisal Work?

During an appraisal, the appraiser—who is usually assigned by the lender—will determine the actual worth of the property based on several factors. Some of these include comparable property values of similar homes in the local market, the home’s condition, property size and location.

Depending on the size of the property, the appraisal could take anywhere from 20 minutes to a few hours. During this time, the appraiser will review the home’s condition and will take photos of the living areas as documentation. Afterward, they’ll create and submit a written report to the lender, which typically takes three to five days.

Home Appraisal vs. Home Inspection

During the home-buying process, you might hear the terms “home inspection” and “home appraisal.” But while these phrases sound similar, they refer to two different services.

  • Home appraisal: An appraisal is performed to determine the market value of a home. This is used by lenders to make sure they don’t lend more than what the home is worth. During this process, the appraisal will generally consider what comparable homes in age, square footage, style and location are going for. Afterward, the appraiser will submit a final report to the lender, and the lender will decide whether to approve the loan. You typically won’t be able to borrow more than 97% of the home’s appraised value.
  • Home inspection: An inspection is a more thorough evaluation of a home to determine its condition as well as to check for any possible red flags, such as issues with the structure, plumbing, electrical system or exterior. Afterward, you’ll receive a report that describes what the inspector looked at and lists any needed repairs. Depending on what the inspector finds, you might decide to negotiate with the seller to have them either perform the repairs or cover some or all of the associated costs.

What Do Home Appraisers Consider?

There are several factors that a home appraisal will consider. Common components of an appraisal include:

  • Living conditions. An appraiser will perform a general assessment of your home’s living conditions to determine if it’s livable. This includes checking that home systems are functional, how many bedrooms there are and whether there are any safety hazards.
  • Home improvements. The appraiser will note if you’ve made any updates or improvements to your home as well as to any non-living areas, such as a basement or garage. Note that these updates must be permanent in order to be included in the evaluation.
  • Values of nearby homes. The appraisal will also consider what nearby comparable properties have been valued to estimate what an appropriate dollar amount is for your home.

Home Appraisal Cost

You can typically expect to pay $300 to $400 for a single-family home. For a multi-family unit, this cost goes up to $600 on average. In general, if you live in a larger home or in an area with a high cost of living, you’ll likely be charged more—potentially up to $800 or more.

Remember that while the lender orders the appraisal, the buyer will have to cover the fee as part of the loan’s closing costs.

What Impacts the Cost of a Home Appraisal?

Appraisal costs can vary by several factors, including:

  • Location
  • Home size
  • Land/property size
  • Type of home
  • Property condition

These components impact how much time and effort an appraisal will take, which will affect the price accordingly. For example, if you live in a rural area or on a particularly large plot of land, you’ll likely be charged a higher fee.

The best way to get a more precise estimate of what a home appraisal will cost in your area is to contact your real estate agent or mortgage lender.

How to Prepare for Home Appraisal

While the preparation for a home appraisal will differ depending on if you’re selling or buying the home, both parties likely have the same goal—to have the transaction proceed smoothly. For this to happen, the hope is that the appraised value will come within range of the selling price.

If it ends up being higher than what the buyer agreed to, they might have to raise their down payment or attempt to negotiate with the seller. On the other hand, if it ends up too low, the buyer might be forced to walk away.

How to Prepare for an Appraisal as a Buyer

  • Consider your offer. In a hot market, a buyer might feel forced to make an offer far above asking price. And if the appraisal comes back low, you might not qualify for the financing you need. To prevent this, do your research before making any offers. Watch out for comparable property prices and make sure to work with an experienced real estate agent who’s familiar with the area.
  • Appeal if necessary. If you think the appraiser made a mistake in their report, you might be able to appeal the decision. For example, if the comparable properties listed are located far from the home you’re buying or property details are listed incorrectly, you can dispute the appraisal. To do so, you’ll need to contact your lender.
  • Don’t worry. Ultimately, the buyer has little sway over the appraisal, so try not to stress over it. Keep in mind that an appraisal is required to protect not only the lender but also you as the buyer from paying too much for a home.

How to Prepare for an Appraisal as a Seller

  • Note the offers you’ve received. Let the appraiser know if you’ve received multiple offers for your home. This can help them determine if your asking price was reasonable.
  • Be home for the appraisal. It’s a good idea to be present for the appraisal so you can identify any improvements or upgrades you’ve made. This way, the appraiser won’t miss anything by accident.
  • Spruce it up. Mow your lawn, clean the outdoor area and trim your trees. Remember that part of the appraisal is based on curb appeal, so anything you can do to improve the home’s appearance can help. Also look for ways to potentially make your home look more spacious and valuable, such as clearing clutter to maximize space and hanging mirrors to make your space look bigger.
  • Do your research. Look into nearby comparable properties and their final selling prices. You can provide these to the appraiser.

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