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The Home Appraisal Process: What You Need To Know As a Buyer or Seller

The Home Appraisal Process: What You Need To Know As a Buyer or Seller

The home selling process can seem like it has plenty of unknowns. Whether you are buying a home or selling your home, the entire process can sometimes feel like a waiting game. Once an offer is accepted, there is still a lot of work to do and the truth is that a lot of that work is being done behind the scenes by your mortgage lender, listing agent, appraiser, and others. Some people prefer not to look behind the curtain, but the process has been set in place over decades of perfecting real estate transactions to protect all parties involved. So one of those essential parts of the process is the home appraisal. People often have a lot of questions about this part of the process, why it’s necessary, who it’s there for, and why it’s done the way it is. So let’s break it down a little bit. 

What is a Home Appraisal and Why Is it Important?

You can look at a home appraisal in two ways. One is to the benefit of the lender and the other is to the protection of the consumer—i.e. the homebuyer. A home appraisal is a professional opinion of a home’s value based on research and certain markers. It is meant to be unbiased so that it serves as an objective opinion of what a home is worth. 

The law was changed a few years ago to help make these appraisals even more objective and to have the appraiser be an independent entity that was not beholden to the real estate agent, the bank, or the seller. This has also created unintended consequences, often making appraisers come from out of town, which prompted questions of how well these appraisers knew the neighborhoods and the true value of the home. 

First and foremost, the lender wants to make sure the home exists, is standing, and is habitable. Another big part is the lender wants to make sure the buyer is not borrowing more than they can handle and that it is a sound investment in case the buyer defaults on the loan. When a sale is an all-cash sale, this doesn’t apply; the appraisal process can be avoided. In a way, the appraisal will also protect the consumer to ensure that the asking price is not unfair and overpriced. 

How is a Home Appraised?

On its most basic level, an appraiser enters and tours the home, making notes on how it compares to other similar homes (in size, style, material, quality construction, features) that have recently sold in the area. 

The appraisal report will have comparisons and different kinds of information. You’ll see:

  • Description of the neighborhood and subdivision
  • Market conditions of the area/subdivision 
  • Sale prices of comparable homes recently sold in the area
  • Age and design of the home
  • Appliances 
  • Brief details on the foundation, exterior description, exterior description, and interior
  • Specialty features of the home
  • A comparison of two or three other nearby properties with similar square footage, in similar subdivisions, and with similar features (one vs two-car garages, refrigerated air vs evaporative cooling, etc)

Somewhere on the bottom of the document, the appraiser will type in the price that he/she has assessed to be the net worth of the home based on all of the above comparisons, criteria, walkthrough, etc. 

It’s not uncommon for people to confuse the home inspection with the home appraisal. These are two different things and are done by two very different kinds of professionals. The inspector will look at appliances, the home’s foundation, roof, doors, structure, etc, for possible damage or impending damage. They will assess whether there are any necessary repairs that need to be done and give the buyer grounds for negotiation if they find anything that’s major and needs to be replaced. The appraiser mostly looks at market conditions and general characteristics of the home. They do not check for a leaky roof to any great detail or anything like that. 

What Happens if You Get a Low Appraisal on the Home You Are Selling?

If the appraisal price comes in lower than the price agreed upon in the contract, it doesn’t necessarily mean that the sale won’t go through. There are a couple of things the seller can do if this happens: 

  • Before the appraisal happens, it is a good idea to submit a list of improvements or upgrades that were done to the home. This shows if you did any work on the home that increased its value. 
  • Ask to review the appraisal to assess any adjustments that were made or not made in the report. 

Get It Right the First Time With the Best Home Selling Team 

Selling a home involves many moving parts. The Brian Burds Home Selling Team is here to ensure that your home is market-ready and will not sit there for weeks at a time. There is nothing more frustrating than sitting and waiting on your home to sell while you are losing money and time. We will get it sold. But first, we explain every part of the process, including the appraisal, so you are in the know every step of the way. 



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