Navigating Home Appraisals: A Comprehensive Guide for Home Buyers and Sellers

A home appraisal is a vital step in the home-buying process, as it involves an unbiased, independent third-party appraiser assessing the property's financial value. This article will provide a comprehensive guide on what home appraisals are, what factors are considered, when they are required, how much they cost, how long they take, common types of appraisals, appraisal gaps, appraisal contingencies, and what to do if you experience appraisal bias.

What is a Home Appraisal? A home appraisal is an estimate of a house's market value conducted by a licensed or certified appraiser. The appraised value is based on various factors such as the home's condition and location, and it may differ from the seller's asking price. Mortgage lenders require an appraisal to assess the current value of the property, ensuring that the price paid reflects its actual worth.

What Factors Are Considered in a Home Appraisal? Appraisers will conduct an in-person assessment of the home before comparing it to sales of nearby comparable properties (comps). The following factors are considered when comparing a home to its comps:

• Square footage and number of rooms
• Age and condition of the home
• Construction quality of the home
• Upgrades and special features, such as a fresh coat of paint or a new front door
• Land area
• Location

When Is an Appraisal Required? If you are buying a home, refinancing your mortgage, or taking out a home equity loan or line of credit, your mortgage lender will usually require an appraisal to approve the loan. Even if an appraisal is not required, there are other reasons homeowners might choose to get a voluntary appraisal, such as selling their home, tax assessment disputes, or estate planning.

Can You Waive an Appraisal? While mortgage lenders typically require an appraisal for an original mortgage, refinanced mortgage, home equity loan, or HELOC, it is possible to get an appraisal waiver if you meet certain requirements. Waivers are limited to primary residences or second homes and must meet loan-to-value ratio requirements. The maximum LTV allowed varies by the type of home loan but is typically 80% for purchasing a primary residence or second home.

How Much Does a Home Appraisal Cost? The lender chooses and schedules the appraisal, but the buyer is responsible for paying for it. The specific cost of a home appraisal can vary but averages about $357 nationwide. Other than requesting an appraisal waiver, the only way a buyer can mitigate the cost of an appraisal is by asking the seller to cover the cost of the appraisal as part of the sales negotiation.

How Long Does a Home Appraisal Take? If your lender requires an in-person appraisal, the actual walk-through process can take up to several hours depending on the size and amenities of the home. The time it takes for the appraiser to complete the appraisal report varies from one home to another but typically takes 11 calendar days from the date the contract is accepted. The lender must provide the borrower with a copy of the appraisal report no later than three days before the closing date.