What Is A Home Appraisal?

Mortgage lenders will require your property to be appraised before approving your loan. An appraisal is a report that sets forth an opinion or estimate of the fair market value of the property. The report is used by lenders to determine how much they are willing to lend against the property.

What You Need to Know


Why is an appraisal completed?

For purchase transactions, the appraisal is prepared to make sure that the property’s market value meets or exceeds the price you have agreed to pay in a purchase contract.

For refinance transactions, the appraisal report makes sure that the property’s market value exceeds the mortgage amount you are applying for in a refinance transaction.

What is appraisal process?

  1. Lenders order the appraisal report
  2. The appraiser agrees to the request from the lender
  3. The appraiser contacts the homeowner (on a refinance) or the seller’s agent (on a purchase) to schedule a home inspection
  4. The appraiser inspects the house
  5. The appraiser drafts the report
  6. The appraiser submits the report to the lender
  7. The lender is legally obligated to provide the borrower with a copy of the report

What does the appraiser do when inspecting the house?

The appraiser completes the following tasks:

  • Measures the House and Sketches a Floor Plan
  • Takes Photos of Interior and Exterior
  • Summarizes General Overall Condition using visual observations (this is not the same as a home inspection because there is no testing of anything)
  • Takes a physical count of all rooms
  • Lists all the Features (e.g. fireplace, garage, heating, type, etc.)
  • After visiting the property, he/she collects the lot size, taxes, zoning, and other land related data via public records.

How does the appraiser determine the value of the house?

Appraisers research sales in the subject property’s neighborhood and selects the sales that are most similar to the subject property. The appraiser then makes adjustments to those sales to account for the differences in features and condition as compared to the subject property. Finally, the appraiser factors in additional information regarding market conditions and housing trends. Once all of this is complete, he/she renders an opinion of value.

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