What is a home appraisal?

How home appraisals estimate the value of a house

The purpose of a home appraisal is to estimate a home's value. Home appraisals are performed by trained professionals who provide an objective estimation of a property's worth, which is also called its "fair market value."

Freedom Mortgage requests property appraisals when we review applications to buy or refinance a home. We use the fair market value to calculate a mortgage's loan-to-value ratio. This ratio helps us determine whether you are eligible for a loan, what interest rate we may be able to offer on the loan, and more.

What happens during a property appraisal?

An appraiser schedules a property appraisal with the homeowner or agent. The appraiser inspects the inside and outside of the property, taking notes, measurements and photographs. Appraisals can take an hour or longer, depending on property size and specific circumstances.

What do home appraisers look for?

Home appraisers look at the age, location, and size of a home. They'll examine its layout to determine if the space is well used and the bedrooms, bathrooms, and kitchen are an adequate size.

Home appraisers look to make sure the home is in good condition and is structurally sound. They will check for signs that the owner has kept up with routine maintenance and repairs, and look for evidence of problems with the roof or foundation. They may examine the interior condition of the home and its plumbing, electrical, and heating and cooling systems as well.

They will look for how the home has changed since the property was last assessed. This includes tracking the number of rooms, bathrooms, and any other major upgrades. Home appraisers may examine the kitchen and bathrooms to determine they are up to date too.

Finally, the appraiser will also research nearby homes that were recently sold and compare their value against the home they're appraising (this can also be called "comparable sales" or "comparable properties"). The value of other similar homes in your neighborhood can have an impact on the appraised value of the home you want to buy or sell.

What hurts a home appraisal?

The same issues that can help a home appraisal can also hurt it. For example, a home with a well maintained roof is likely to be appraised at a higher value than a similar home with a poorly maintained roof and signs of water damage.

In some circumstances, a home appraisal can be hurt by incorrect information. It's always a good idea to double check that the appraisal report matches your understanding of the home and the comparable properties the home appraiser chooses are good matches for the home.

How long does a home appraisal take?

The short answer is that it varies. A home appraisal of a larger property will inevitably take longer than the appraisal for a small home. Allow at least an hour or two for the process to be completed.

How long until the home appraisal report is ready?

After appraisal, appraisers typically need 3 to 10 business days to draft a report. Co-op and condos can take longer if the appraiser needs information about the building from a board of directors or management company.

What's in the home appraisal report?

The report includes an estimated home value. It also may include property details such as floor plans, square footage, and photos and area maps with nearby "comparable" properties sold in the past 6 to 12 months. Rental units may include comparable rent schedules.

What if a property appraisal comes in higher or lower than expected?

The appraised value of a house can be higher or lower than its sale price. When this happens, it can change your loan-to-value ratio and may affect your eligibility to be approved for a loan.

Your eligibility is typically not affected when the appraised value of a home is higher than its sale price. Your eligibility may change when the appraised value is lower than the sale price, however. That's because most mortgage programs have a maximum loan-to-value ratio, and this ratio can increase beyond the maximum allowed when the appraised value of a house is lower than expected. In these cases, you may need to increase your down payment or negotiate with the seller to lower the home's sale price.

The appraised value of a home can also affect your eligibility for refinancing a mortgage. Different lenders have different standards for the loans they offer, and Freedom Mortgage considers factors besides a home's value when we make our lending decisions.

How much does a home appraisal cost?

Home appraisal costs can vary, but you should be prepared to spend at least a couple hundred dollars. Buyers are typically responsible for the cost because lenders require an appraisal to approve a mortgage.

What's the difference between the home appraisal and a home inspection?

When you buy a house, it is a good idea to get a home inspection. A home inspection determines if a house needs repairs and how much those repairs may cost. Home inspections can reveal issues such as a wet basement, a leaking roof, mold, radon, problems with the electrical, plumbing, and heating and cooling systems, and more. Home inspections should be conducted by an expert. Home appraisals are focused on estimating the value of the home (although a leaking roof would impact that value). Learn more about home inspections.

Do you have questions about a home appraisal?

If you are working with Freedom Mortgage to buy or refinance a house and have questions about your home appraisal, please contact the professional managing your application. You can also call our Customer Service department at 855-690-5900.

Last reviewed and updated May 2023 by Freedom Mortgage Corporation.