Home Appraisal Cost: A Complete Guide

After you find a house you want to call home, you’ll begin the sprint toward closing day. If you’re purchasing a home with a mortgage, you’ll pay various closing fees, including the cost of a home appraisal. But what is a home appraisal – and how much will it cost?

Let’s explore how home appraisal costs can impact your homeownership journey.

What Is A Home Appraisal?

A home appraisal is a professional assessment of a property that attempts to determine its fair market value.

Before lending money, a bank or lender typically verifies a property is worth at least its purchase price. One goal of an appraisal is to get everyone involved in the deal – including the buyer, seller and lender – on the same page about the home’s value.

When Do You Need A Home Appraisal?

Typically, a lender orders an appraisal after a buyer and seller have agreed on and signed a purchase contract. It’s a step in the home buying process between a signed purchase contract and the closing date.

However, home appraisals aren’t limited to purchasing homes. An appraisal can benefit current homeowners in several ways, including refinancing their mortgage, applying for loans that use the home as collateral or during a tax assessment appeal. 

Home Appraisal Vs. Home Inspection

A home appraisal establishes the fair market value of a home. In contrast, a home inspection assesses the physical condition of a home. During a home inspection, an inspector notes the condition of critical systems and appliances and the home’s structural soundness.

A buyer can use an inspection report to get an idea of the issues in a home. For example, if the home inspector determines the cooling system is running too warm, you might factor the cost of replacing the system into your budget. In some situations, you could negotiate for the seller to replace it.

How Long Is An Appraisal Good For?

While there’s no set period appraisals are good for, most banks will accept an appraisal that is no more than 3 – 6 months old. Because the real estate market can change rapidly, lenders will likely reject older appraisals and require you to get (and pay for) a new one.

How Much Does An Appraisal Cost?

The cost of a home appraisal will vary based on the home’s location and features. Most prospective homeowners should expect to pay anywhere from $375 – $600 or more for a home appraisal, depending on the area and the property type.

Who Pays For The Home Appraisal?

In most cases, the buyer pays for the home appraisal. Most lenders require a home appraisal, so avoiding the cost may not be possible. However, a buyer can negotiate with the seller to have them cover this cost.

Before arranging a home appraisal, get clear on who is paying for it and its cost. It’s always best to get the estimated cost in writing to avoid any unpleasant surprises.

Factors That Affect The Cost Of A Home Appraisal

As with most things in real estate, several factors can impact the cost of a home appraisal, including:

• Location
• Price differences across individual appraisers
• Square footage of the home
• Special features of the home

Some lenders offer a list of preferred appraisal companies in your area, while others allow you to work with any qualified, independent home appraisal company. Regardless of the appraisal company, buyers are usually on the hook for appraisal costs.

What Do Home Appraisers Look For?

Most appraisals involve two main stages.

First, an appraiser will collect information on the home and its surroundings. These details might include:

• Number of bedrooms
• Number of bathrooms
• Total square footage of the house
• Size of the lot
• Home condition
• Home improvements
• Appliances
• Other features of the home
• Neighborhood characteristics

Once an appraiser has all that information, they research the sales of comparable homes within a short radius of the property to determine how much similar properties sold for. Comparable sales or “comps” are critical to estimating a home’s market value. That is why homes with unique features can be more challenging to appraise accurately.

Full Appraisal Vs. Drive-By Appraisal

Sometimes, an appraiser won’t even step foot in a home. The appraiser can perform a “drive-by” appraisal. They’ll drive by to visually inspect the home from the outside and then look up comparable sales. If your lender orders a full appraisal, the appraiser will likely enter the home to evaluate it for about 15 – 30 minutes.

What Hurts A Home Appraisal?

While most home appraisers aren’t looking for cosmetic issues – like a child’s toys neatly tucked away or a kitchen sink full of dishes – it never hurts to tidy up before the appraiser pays a visit.

Most things that can hurt a home appraisal are things you won’t have much control over, such as the location or neighborhood, the size of the home or lot or the number of bedrooms or bathrooms in the home. But a few variables that can impact a home’s appraisal value might be under your control:

• The condition of the foundation and exterior walls
• The condition of exterior features, like the roof, gutters and downspouts
• The condition and age of major mechanical systems, like the furnace, air conditioner, plumbing and electrical systems
• General maintenance and upkeep, like peeling paint, leaky faucets or missing door handles

Make sure to address any maintenance issues before an appraisal. Taking care of these known issues before an appraiser stops by can help you avoid an unexpectedly low appraisal.

What If An Appraisal Comes In Low?

If the appraisal comes back with a home value that’s less than the purchase price, the bank may require you to increase your down payment. While you have likely been saving for a down payment, you may need to come to the closing table with more money.

In the worst-case scenario, you may not be able to follow through with the deal because the lender will never give you a loan for more than a property’s appraised value.

House Appraisal Cost FAQs

It’s normal to have questions about a home appraisal. Below are the answers you’ve been looking for.

Why do I need an appraisal?

For buyers taking out a mortgage to purchase a home, the lender will likely require a home appraisal to confirm the home’s fair market value to avoid lending more money than the home is worth.

Even if you aren’t getting a mortgage, a home appraisal helps determine the fair market value of the home. With this information, you can also avoid overpaying for a property.

Who can act as a home appraiser?

An appraiser is a professional licensed by the state. Most appraisers take classes and intern to receive their license. Appraisers are involved in most real estate transactions and offer an independent third-party opinion on how much a home is worth.

If you’re taking out a Federal Housing Administration (FHA) loan, you’ll need an FHA-approved appraiser to determine the home’s market value. The same is true for VA loans.

Should you walk around with the appraiser?

A seller or homeowner doesn’t have to walk around with the appraiser. But if you want to see what the appraiser is doing, many won’t object if you tag along. For sellers attending an appraisal, be prepared to answer some questions about the state of your home.

The Bottom Line

A home appraisal will give you an idea of a home’s fair market value. Most importantly, you’ll know whether you might be overpaying for the home. Changing real estate market conditions mean an accurate home appraisal might not be valid for too long. But it’s an essential part of closing on your home loan.

If you are starting your journey toward homeownership, the first step is to get your finances in order. Sign up for the Rocket Money^SM app to track your net worth and save money to buy a home.