When determining a home’s value, an appraiser compares the home’s features to those of similar, recently sold properties.

Since every home has unique features and characteristics, the appraiser applies dollar or percentage adjustments to account for differences.

For example, your home may have a pool and cabana in the backyard, while a similar house nearby sold without these features. The appraiser would determine whether your pool and cabana merit a higher valuation and adjust for those features.

When determining value, “all components of the real estate are considered,” says Spurgeon. Some of the characteristics an appraiser considers include:

A home’s structure, condition, and size

• Square footage
• The number of bedrooms and bathrooms
• Foundation type
• The type of materials used
• The presence of a basement, crawl space, or attic
• Cosmetic updates and desirability of finishes
• Evidence of deferred maintenance, physical deficiencies, or adverse conditions

A home’s external characteristics

• Neighborhood setting (urban, suburban, or rural)
• Zoning classification
• Lot size
• The driveway surface and car storage

Additions and updates

• Energy-efficient features
• Fireplaces or wood stoves
• Fencing
• A patio or deck
• A porch

Other factors

• Financing terms
• Conditions of sale
• Market conditions

Home appraisals cost $347 on average

Your home’s location, size, and structural details may impact the final fee. According to HomeAdvisor, the average single-family home appraisal costs $347, with most people spending between $312 and $419.

However, certified general appraiser Mike Ford shares that in his 40 years of real estate experience, appraisal fees tend to skew higher than the reported average. “Almost anywhere in the country, the minimum amount necessary for a credible home appraisal is likely going to be somewhere between $450 to $550,” he notes.

In most cases, you don’t have the option of shopping appraisal companies to secure a low price; the lender coordinates the appraisal. While some lenders directly hire an appraiser, many hire a third-party appraisal management company (AMC) to maintain impartiality. The AMC then hires the appraiser on the lender’s behalf.

The party applying for the loan (the buyer when purchasing or the homeowner when refinancing) is generally responsible for paying the appraisal fee.

Whether you purchase a home or refinance an existing mortgage, lenders typically require an appraisal to ensure that your loan-to-value ratio falls within their underwriting guidelines. Mortgages are secured loans where the lender uses your home as collateral in case you default on the agreed-upon payments.

For both purchase and refinance appraisals, appraisers generally use the Uniform Residential Appraisal Report (URAR) form and follow the same systematic procedure for developing an opinion of value.

The primary difference between an appraisal report for a home sale and a refinance? With a purchase transaction, the appraiser may use the purchase agreement as a guidepost, or point of reference when determining a home’s appraised value.

FHA appraisals have special minimum requirements

Unlike a conventional appraisal, an FHA appraisal does more than verifying a home’s market value. Spurgeon explains that the FHA valuation process mirrors that of a conventional appraisal. However, an FHA “appraisal inspection is more exhaustive and specific” since the FHA has minimum property requirements that must be met for loan approval.

FHA appraisers must determine that the home meets Housing and Urban Development (HUD) eligibility standards. Those requirements include the property’s physical condition and whether repairs are necessary before closing. In essence, the appraiser conducts a visual inspection of the home to ensure the property’s safety, security, and soundness.

Some FHA appraisal red flags could include:

• Inoperable appliances when the appliance contributes to the overall value of the home
• Improper drainage control (for example, the appraiser would note standing water near the home)
• Evidence of termite infestation
• Evidence of dampness or settling of the foundation
• A roof nearing the end of its functional life
• Peeling paint in homes built before 1978, which could contain lead-based paint

As the seller, you’ll need to repair any unacceptable conditions before closing. Alternatively, you can hire a qualified specialist to inspect flagged issues to declare they are not unsafe.

In 2021’s hot seller’s market, many buyers are paying well above the listing price to outcompete other buyers. Consequentially, appraisers do not always find market data that can justify these higher sale prices, leading to an increase in appraisal gaps (where the appraised value is lower than the purchase price).

Real estate analytics and data company CoreLogic observes that these appraisal gaps are sometimes due to the inherent data lag in real estate transactions. Appraisers use data from recently sold homes as comparables. However, CoreLogic points out that the purchase price of a closed home may have been negotiated two months prior. If offer prices have increased substantially in that period, the data could already be outdated, making it difficult to pinpoint a present-day valuation.

You can often challenge or work around a low appraisal

If you believe the low appraisal is unjustified, you’ll need to round up evidence and ask for a reconsideration of value.

First, review the report with your agent to ensure that there are no data discrepancies. In one instance, Jacobs has seen an appraiser list a 3-bedroom house as a 2-bedroom house in the report, where a third bedroom had a significant impact on the home’s value.

Next, ensure the appraiser used the most relevant sales comparables. Jacobs shares that your agent can round up comparables that more closely match your home than those the appraiser used in the report. If these homes sold for more than the comps used, you can justify a higher appraised value.

“When somebody thinks the appraisal came in low, the best thing to do is to get proof in the form of other comparables in the same neighborhood,” Ford confirms.

Once you’ve rounded up evidence, submit a written request to the buyer’s lender, along with supporting data. It’s ultimately up to the lender to challenge the appraisal, so you’ll want to make the best case possible to convince them to do so.

Note: In most instances, appraisers won’t change their opinion of value Appraisers rarely change their original opinion of value — unless they make a material error. According to Ford, an appraiser can back up their opinion of value around 85% to 90% of the time. He shares that often appraisers prove the new comparables proposed by the agent are not similar enough to the property to use.

That said, there are times when new comparables are justifiable. For instance, let’s say there are two identical homes in the same location, but the appraiser pulled the lower value of the two to appraise your home. It turns out one of them was an inherited property priced to sell fast, and that’s the only reason it sold for less. Then you might have a case that could prompt an appraiser to own up to modify their report.

2. Switch lenders and obtain a new appraisal

Occasionally, you can get a second appraisal, but that can be expensive and often requires the buyer to switch mortgage lenders, Krueger says. Could it be worth it? Maybe. Krueger once saw a rise of $30,000 between the first and second appraisal on the same house.

3. Negotiate with the buyer to save the deal

In some cases, the buyer wants to purchase your home just as much as you want to sell it. That means even if the appraisal comes in low, you may agree to one of these workarounds:

• You reduce your asking price to match the appraisal.
• The buyer makes up the difference between the sale price and appraised value in cash.
• You and the buyer meet somewhere in the middle.

Discuss these options with your real estate agent; they can often negotiate with the buyer to save the contract.

Avoid low appraisal headaches by negotiating an appraisal guarantee with the buyer early on

If you and the buyer anticipate the appraisal will come in low, consider adding an appraisal gap guarantee to the purchase agreement.

With an appraisal guarantee, the buyer agrees to cover the gap between the appraised value and purchase price (often to a specified limit) if the appraisal comes in low. So if you agree on a purchase price for $300,000 and your appraised value comes in at $275,000, the buyer would be responsible for the $25,000 difference out of pocket.

In a competitive market, buyers are more likely to chip in to cover appraisal gaps. For instance, Jacob reports that in 2020, buyers in her market typically agreed to contribute $5,000 to $10,000 to cover an appraisal gap. In the 2021 market, the average contribution increased from $10,000 to $25,000.

While you can’t control an appraiser’s decision, presenting your home in its best light can’t hurt your chances for a successful appraisal. Try these tips, and check out HomeLight’s appraisal checklist before your appraisal appointment.

Prepare an appraisal package

The National Association of Realtors recommends preparing an appraisal package for the appraiser that includes:

• Recent comparable sales
• A detailed list of recent renovations and updates, along with costs
• Floor plans
• Inspection reports
• Neighborhood details
• Property details, including surveys and covenants
• A list of energy-efficient features

Deep clean the inside of your home

When preparing for an appraisal, clean as if you’re showing the house to buyers. Use our essential guide to cleaning to ensure you don’t miss a spot.

Secure your pets

It’s a basic courtesy and allows the appraiser to work more efficiently, even if they’re a dog person.

Spend an afternoon cleaning up the yard

No need to get too fancy — just make sure the front of the house looks nice and tidy. Pull any weeds, mow the lawn, trim the hedges, edge the grass, brush away cobwebs, and clear leaves and debris.

You can’t necessarily put a price on curb appeal through quantitative appraisal methods, but appraisers do take it into account qualitatively when reconciling that final value.

Touch up your paint on the outside of your home

During an FHA appraisal, the inspector looks for surface cracking, peeling, and other defects that potentially expose underlying lead paint beneath. That includes windows, doors, railings, sheds, and other outbuildings.

If you don’t have extra paint in your basement, you can use a razor blade to take a small swatch from the wall and color match it at a paint store.

Key takeaways on what to expect from a home appraisal

• It takes around two weeks to receive a home appraisal, but that timeline can vary depending on market conditions and the appraisal’s complexity.
• Appraisals evaluate all aspects of the home — but not your personal property.
• If you’re refinancing, the home appraisal process is pretty much the same as if you were purchasing a home.
• FHA appraisals are more stringent than conventional appraisals. HUD requires appraisers to evaluate potential health, safety, and structural issues in addition to determining value.
• In a hot seller’s market, there’s a higher chance that your appraised value will come in lower than your contract price. Your real estate agent can help you prepare in advance by negotiating an appraisal gap guarantee with the buyer.
• You can challenge a low appraisal, but you’ll need to justify a higher value with relevant data.
• Prepare for your appraisal by tidying up and preparing an appraisal package in advance. Check out HomeLight’s appraisal checklist for more tips.

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