A home appraisal is an important part of the home selling process. Anytime a home loan is requested, an appraisal must be completed. The appraisal is an assessment of how much the home is worth based on a visual inspection, the recent selling price of comparable properties, location, and the home’s amenities (such as square footage and bedroom count).
Lenders don’t want home buyers to borrow more than the home is worth. If for some reason the buyer defaults on payments and the home goes into foreclosure, the lender will be unable to recoup all the money it lent. Therefore, it's to a home seller’s advantage for a home appraisal to come in close to the buyer's offer price – otherwise, the lender may decline the mortgage.
Appraisal contingencies: Low appraisals have a real impact on home sales. Some home offers come with an appraisal contingency, which means that if the home is valued too low, the contract will be terminated. Approximately 4% of all home sales end up falling through, and one common reason is financing issues due to a low appraisal.
The appraiser will do a visual inspection of your home, in addition to research they conduct on your home, the local market, etc. They will be noting:
An updated and roomy kitchen with new appliances, for example, will add more value to your appraisal than a small, outdated one.
They will also be evaluating the quality of your:
A newly installed HVAC system, for example, can add more value to your appraisal than a 15-year system.
The appraiser is going to research your home and evaluate:
Appraisers do not always check under the sink. Why? Even if the home has (for example) a leaky garbage disposal, it's not usually enough of an issue to impact the home's appraised value - an appraiser isn't an inspector. A $100 problem, for example, won't typically impact the appraisal amount. But they can check, and they may - especially for FHA loans, in order to check for structural damage.
In order to correctly conduct an appraisal and check on the condition of your flooring, windows, HVAC system and more, the appraiser needs to come inside the home.
According to The Balance, the average home appraisal costs $300 to $450 for a single family home. However, the exact amount can vary depending on location and complexity.
According to ProMaster Appraisers,
It’s clear that location plays a big role in price. Complex homes – like waterfront homes, sustainable (green) homes, historic homes, and farms – will also have higher appraisal costs.
Who pays for home appraisals?
In a typical home sale, the buyer pays for the home appraisal – and these are part of the buyer’s closing costs. After all, it's the buyer’s lender who is requesting the appraisal.
A messy house shouldn’t impact your appraisal. Here’s why: the appraiser is there to evaluate your home, not your stuff. Appraisers are, in fact, trained to ignore messes.
However, it’s worth keeping in mind three things.
“Generally speaking, a messy house with scattered clothes, toys or belongings does not affect an appraisal. Appraisers are professionals that have been trained to look past the clutter and assess the true value of the property,” explains Albert Lee, Founder of Home Living Lab.
“That being said, extreme clutter with bulky items and furniture everywhere would prevent the appraiser from assessing the structural integrity of the house properly. This will affect the valuation of the house as appraisers are forced to err on the side of caution when they do not have the full picture.”
Since an appraisal covers the overall condition of your home, pretty much any structure can negatively impact the appraisal. The appraiser will consider things like the age of your plumbing and roof, the building materials used to construct your home, and unusual features that add value (like a finished basement or an outdoor space in an area where few comparable properties have yards). Mostly, the appraisal is going to be impact by your home's location, the square footage, etc. - things that are difficult to change.
A home appraisal is good for 120 days (a total of four months). If your home doesn’t close within that time frame, you’ll need to order a new appraisal.
Even though most factors that impact your home appraisal are outside your control, there are some steps you can take. Numerous small issues can otherwise add up, and collectively can hurt your home appraisal.
A lower than expected home appraisal can derail an otherwise successful home sale. Luckily, there are a few ways you can fight back against a low appraisal.