How a Home Appraisal Works and How Much It Costs

The Appraisal Process and How Values Are Determined

Because the appraisal primarily protects the lender's interests, the lender will usually order the appraisal. An appraisal costs several hundred dollars and the borrower generally pays the fee.

According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified—as required in all 50 states—and be familiar with the local area. Per federal regulations, the appraiser must be impartial and have no direct or indirect interest in the transaction.

A property's appraisal value is influenced by recent sales of similar properties and by current market trends. The home's amenities, the number of bedrooms and bathrooms, the floor plan's functionality, and the square footage are also key factors in assessing the home's value. The appraiser must perform a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property's value, such as needed repairs.

Who Pays For The Appraisal?

The potential home buyers are usually responsible for covering appraisal fees, even though most mortgage lenders will arrange and schedule the actual appraisal. The cost of an appraisal is usually due at the time of closing, but buyers can typically choose to pay the fee upfront. 

Depending on the market and the home itself, a buyer may be able to request that the seller pays for the appraisal during negotiations. However, this is rare and typically only done by a home seller as a way to sweeten the deal before closing. 


Independent Appraisal

Appraisers work independently as well as for lenders. Contact a local, licensed or certified appraiser who is familiar with your community to give you a current market evaluation of your home. Independent appraisers have no hidden agenda, are not working for lenders or buyers, and can give you a qualified estimation of value for your home.


While avoiding an appraisal altogether might not be an option for those financing the purchase of their home, there are ways you can positively influence the outcome.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.

Home Appraisal Tips For Refinancers

When you’re refinancing, you want to get the highest appraisal value possible. A low appraisal value could keep you from refinancing, but a high appraisal value means more equity for you – which could mean more cash out or better loan terms. Here are some ways to up your chances of a high appraisal value.

Get An Outside Opinion

Your home is full of memories, which may give you blind spots when it comes to defects in your home. Have a friend or family member examine each room in your home and point out areas that can be improved. Sometimes, a new set of eyes is just what you need.


A thorough decluttering will help each room look more put-together. While your appraiser shouldn’t assess your home’s value based on how much clutter or mess there is, it’ll be easier for them to see your home favorably if everything’s put away nicely.

List Upgrades And Improvements

Upgrades and improvements can increase your property’s value, but the work you’ve done may not always be obvious. Did you get a new air conditioner? Replace the windows? Add new landscaping? Provide your appraiser with a list of upgrades you’ve made so they can consider these items in their report.

It should be noted that these have to be improvements to have an impact on value. If you didn’t have an air conditioner before, the addition of central air adds value, for example. However, if you replace an air conditioner that broke, that’s maintenance and doesn’t add to the value.

Dealing With a Low Appraisal 

A low appraisal can delay or even cancel a sale; buyers and lenders don't want to overpay for a house, and sellers may not want to drastically lower the price they were hoping to get.

You have a few options if the appraisal comes in low. If you wrote your offer contract to include a contingency that requires that the property be valued at the selling price or higher, you can walk away from the deal. 

If you're buying, another option is to try to negotiate with the seller to reduce the sales price. A third alternative might be to put more money down to cover the difference between the appraised value and the sales price.

And you can always dispute the appraisal. Find out what comparable sales were used and ask your agent if they're appropriate. Your agent might be more familiar with the area than the appraiser was and might be able to locate additional comps to support a higher valuation. 

How Much Does A Home Appraisal Cost (And Who Pays)?

A home appraisal can cost anywhere between $600 – $2,000. You’ll pay less for a single-family appraisal than a multifamily one.

Even though most lenders require an appraisal as a condition of a loan closing, the buyer pays for the appraisal unless they negotiate for the seller to pay instead. The amount that a buyer pays for an appraisal depends on a number of factors, including the size of the home, the home’s location and the amount of property research that the appraiser ends up doing before they issue a final value report.

Keep in mind that if the property is on a very large plot of land, the appraisal cost will be more because the appraiser often surveys the boundary lines of the property to make sure that the listed square acreage is correct.

Buyers can also expect to pay a higher appraisal fee in a very rural area simply because there are fewer appraisers working in these areas. This might mean a longer wait for an appraisal as well. If you have any questions about how much your appraisal will cost, consult with your mortgage lender.

Using Comps to Determine Market Value

The appraiser should know the area the home is in and will analyze the neighborhood as well as the details and condition of the house to provide an assessment of the fair market value.

The most important component involved in arriving at a property's value is called "comparable sales," or "comps." These are similar properties, usually located within a mile or so of the home in question, which have sold in the last 90 days.

The appraiser compares several of the property's features against the comps to arrive at the value. Factors include square footage, appearance, amenities, and condition. 

For example, a large four-bedroom home in an area where mostly three-bedroom homes have recently sold will likely have a higher value than those comps. Likewise, a house with peeling paint and a patchy lawn in a well-manicured subdivision will typically appraise at a lower value than otherwise similar properties.

Decoding Your Home Appraisal Report

When you get your home appraisal report, you’ll likely jump to the page that includes the final appraisal value. If the value is the same or very close to the proposed sales price, there shouldn’t be any complications with the loan.

However, appraisal issues were responsible for 18% of home purchase closing delays and 9% of terminated contracts in June 2020, according to a National Association of Realtors study.

The report will include:

  • The value, including the definition of value—such as market value—and its effective date (the appraisal is usually good for four months)
  • Characteristics of the property, including its features and condition
  • Background on the market, the home location and the information—including comparable property—that back up the appraiser’s value determination
  • Special instructions from the lender or other related agencies

The report is usually sent to the buyer when the lender gets it, at least three days before the closing date.

How to Challenge a Home Appraisal Report

If you feel you received a low appraisal and want to challenge the conclusions in the report, you can contact the lender. It’s best to send the information in writing, and it’s possible a revised appraisal could be ordered.

Issues to look for include:

  • An incorrect number of rooms and failing to account for major parts of the home, such as a garage
  • Square footage listed that doesn’t resemble the actual size
  • Comparable sales that aren’t located near the home or that were completed many months ago
  • Major upgrades that were ignored in the report

If you choose to get a second appraisal, it can’t be used by the lender as the proof of the home’s value, but it can help make your case against the original appraisal.

What Refinancing Homeowners Need to Know About Appraisals

If you’re refinancing a conventional mortgage, a low appraisal can prevent you from doing so. The home needs to appraise at or above the amount you want to refinance for your loan to be approved. However, if your existing mortgage is an FHA mortgage, you can refinance without an appraisal through the FHA streamline program—a great option for underwater homeowners.

How Long Does An Appraisal Last?

Since appraisal valuations are based on ever changing market conditions – and the condition of the property at the time of the appraisal – home appraisals won’t last forever. Most home appraisals are good for a total of 120 days (4 months). If you don’t close on your home within that time, you’ll need to have another assessment. 

You may be afforded an extension, though it’s pretty rare and only allowed under very particular circumstances for eligible borrowers. The exception is the VA, which has a 180-day timeline for most valuations – except for IRRRLs (VA Streamlines), which also have 4-month timelines. 

At their core, appraisals have short lifespans because market conditions change. Home sales from 6 months ago may be drastically different from those in recent months, especially if the real estate market is volatile. 

Home inspection vs. home appraisal

Unlike an appraiser, the home inspector’s goal is to evaluate the home for signs of damage or issues. An appraiser might assume the dishwasher is working if it’s not leaking, for example, but a home inspector would run it to confirm it functions properly.

Appraisals and inspections have some similarities, though, including that they take into account the condition of the home. Both services can cost about the same, too.

Why is an appraisal needed?

An appraisal benefits both the homeowner and potential buyer.

“An appraisal is always in the best interest of the buyer as it will assess the value of the property and help the buyer have confidence in the purchase price of the home,” Boies says.

A property appraisal is also important for the homeowner or potential buyer because it establishes the parameters of the mortgage loan.

“Once the value of the home is established through the appraisal, the lender can make an offer based on the available loan-to-value ratio,” McClary says. “Property appraisals also help determine the cost of the loan. A well-maintained property can lead to a loan with a more favorable interest rate than one that is in disrepair because of the direct effect on loan-to-value ratio.”

Appraisal Tips for Home Sellers

If you’re selling your home, you’ve probably done a lot of work to make it look as good as it can, both inside and out. You’re not likely to make major changes in the short period of time between the sale agreement and the home appraisal process.

But you can do some basic cleaning and upkeep to ensure the home is still in top shape for the appraisal visit. You’ll want to:

  • Make sure important mechanical devices connected with the home are working, such as the electric garage door opener
  • Ensure there are no obvious repairs needed, especially ones—such as faulty railings or steps—that could cause a safety issue.
  • Clean up or address problems with the roof and windows or repair water leaks and other issues that could imply there are active problems within the home
  • Conduct basic cleanup inside and outside the house, so it looks as good as possible

Home sellers can possibly increase the value of their home appraisal by giving the property appraiser information about notable property improvements, including a new roof, updated siding, recently purchased furnace or air conditioner unit or an addition.

You’re at risk of lowering the appraised value of your home if you let clutter take over, don’t address safety issues and have an unkempt front of the home that limits curb appeal. Also, keep track of sales in your neighborhood, as a cluster of distressed sales in which owners didn’t get market value for their homes could negatively affect your appraisal.

How is a home appraised?

During a home appraisal, a licensed appraiser conducts a thorough inspection of the property.

The appraiser will consider all factors that could affect the property’s value. These factors include the condition of the property, any upgrades or additions made to the property, the size of the lot and “comps” or recently sold properties of comparable size and condition in the same market.

→ Continue reading: How long does a home appraisal take?

Tax Rolls

The tax assessor or county clerk’s office in your locality performs a property tax assessment on your house to establish the amount you pay in taxes. This figure is not a market “sales price” estimate. It is usually divided into two figures: a house assessment and a land assessment. Added together they amount to the basis for your yearly tax payment. Do not use the tax assessment to set a current market value for your home.