What Is a Home Appraisal

A home appraisal is an in-depth assessment of a home’s condition and value based on local market conditions. Appraisals are conducted by a licensed appraiser, often as part of financing or insuring a home.

Read on to learn more about the different types of home appraisals and what you should pay attention to before and during one.

Home appraisal explained

Before diving into the details, let’s look at how home appraisals generally work. In the following section, you’ll see a basic summary of the appraisal process.

What is a home appraisal?

A home appraisal is a written document that details a property’s worth. The independent, unbiased opinion of the appraiser shows the property’s fair market value and may compare it to other homes in the area.

You’ll typically need a home appraisal if you want to buy or refinance a home or apply for a mortgage, a home equity loan or home insurance. In most cases, the property appraisal serves as proof that the amount you plan to borrow doesn’t exceed the property’s value. Furthermore, an appraisal of a property helps determine whether the contract price aligns with the home’s condition.

What does a traditional home appraisal process look like?

To get a home appraisal, you need to schedule an appointment for an inspection with a certified home appraiser. If you plan to take out a mortgage loan, your lender will usually recommend some professionals or schedule the appraisal itself. The appraiser or inspector will inspect your property and ask you about specific details and features of it. This may take between one and three hours, depending on the quality, location and square footage of the home, among other factors.

After the inspection, your appraiser will verify and summarize the data and prepare the appraisal report. Generally, this takes up to two weeks. When your home appraisal report is ready, you can proceed to the next stage of the sale or refinancing process.

What are the different types of home appraisals?

There are several types of home appraisals, each utilized in different circumstances. Here’s what to expect from a full, exterior, hybrid and virtual appraisal.

Full appraisal

Full appraisals are the most common type of home appraisals. During a full appraisal, a home appraiser comes to your property and thoroughly inspects your home’s exterior and interior. The appraiser might assess the condition of each room, take pictures, ask you about certain features of the house and compare it to other properties in the area.

Exterior or drive-by appraisal

During an exterior appraisal, the appraiser doesn’t have to leave their vehicle to inspect your property. They take photos, assess the condition of the exterior and compare it to other properties in the area — but they don’t inspect the interior. Instead, they rely on public data and tax reports to create their report. This type of appraisal is also called a drive-by appraisal.

Exterior appraisals are usually cheaper, faster and more convenient than full appraisals. However, they provide less accurate and comprehensive reports than traditional appraisals. Exterior appraisals are used less commonly, as most lenders require a full one.

Hybrid appraisal

Hybrid appraisals are a relatively new alternative to traditional appraisals. With a traditional appraisal, the licensed appraiser comes to your home for the physical inspection. However, with a hybrid method, the appraiser hires a third-party data collector to check out your property.

The data collector inspects your home just like an appraiser would. They take photos, evaluate your home’s features and compare it to other properties in the area. After the inspection, they forward the data to the appraiser, who completes the report.

Hybrid appraisals tend to be significantly faster than traditional appraisals. They usually take around 30 to 60 minutes. However, third-party data collectors may lack a certified appraiser’s expertise and credentials. Because of this, hybrid appraisals are more likely to be inaccurate than traditional appraisals.

Virtual appraisal

Virtual or desktop appraisals are the newest method of appraising homes. During a virtual appraisal, the appraiser inspects the home through a video conference. Otherwise, the appraisal is carried out the same as a traditional full appraisal.

The obvious benefit of a virtual appraisal is that the appraiser doesn’t have to physically come to your home. This allows a more convenient process for both of you. However, you need to be able to handle the technology needed.

Virtual appraisals started as a remote alternative to traditional appraisals during the COVID-19 pandemic and quickly became popular. Beginning in 2022, Freddie Mac and Fannie Mae started accepting virtual appraisals under a few conditions. Your home needs to be a one-unit property with a loan-to-value ratio not exceeding 90%. Additional property information must be available from existing sources for the home to be eligible for a virtual appraisal.

What will be looked at during an appraisal?

When performing a property appraisal, appraisers look at a range of features. This includes the interior and exterior of the home, improvements to the house and the value of surrounding homes. This is what is typically considered during an appraisal:

Exterior

When assessing the exterior of a home, the appraiser examines whether the structure of the house is solid. They observe the condition of the chimney, stairs, roofs, garage and other exterior features. Appraisers also look for problems such as cracking, leaking or water damage. They inspect the materials used, the design and the general age and condition of the house.

Interior

During the interior appraisal, the appraiser takes note of the bedrooms, bathrooms, kitchen and living spaces within the home, plus additional interior spaces like the basement and attic. They carefully examine the structure and condition of each room. They assess the foundation and the materials used and look for any problems with the home. The appraiser will pay close attention to everything from doors and windows to ceilings, walls and interior fixtures.

Improvements

The appraiser takes note of the age of the house and any improvements that have been made to the structure. They may ask questions about the history of the home, examine whether the rooms have been renovated and record improvements that add value to the house. Features appraisers look for include energy-efficient appliances, fireplaces, patios, air conditioning and other upgrades.

Value of the surrounding homes

Your home’s location is a crucial aspect of your appraisal, as it impacts the comparable properties (or “comps”) used in determining the value of your home. Being in a desirable neighborhood with a good school system, for example, can increase the sale price of your property. The appraiser also considers the proximity of the house to supermarkets, hospitals and other amenities, and evaluates local market conditions.

Appraisers also observe whether the homes surrounding your property are primarily single-family homes, commercial properties or apartments. They assess their values by looking at available purchase prices and the overall desirability of the area.

What is an appraisal report?

The appraisal report is the detailed document you’ll get after the appraisal of your house is complete. It breaks down all the different features and details of the property that make up the value of your home. Appraisal reports are a necessary step for lenders underwriting a home equity loan or mortgage on your property.

The most important part of the appraisal report is the fair market value of your home. It’s a specific number based on the home’s condition and the value of the surrounding properties. In addition, the appraisal report describes all the methods used to calculate the home’s fair market value.

It includes a comprehensive overview of the property and the issues, damages and improvements found. Most appraisers provide a brief summary of local market trends, comparable properties and other considerations to help you understand their evaluation.

What should sellers watch out for?

There are a few things you should be aware of during a home appraisal. Read on to learn more about appraisal bias and incorrect appraisals.

Appraisal bias

Researchers found that racial and ethnic bias results in a depressed value assigned to properties located in majority-Black and -Latino neighborhoods. These biases can happen consciously or unconsciously and may also affect refinance valuations and property taxes.

If you think you might be a victim of appraisal bias, there are a few steps you can take. Examine the appraisal report to ensure all the details on it are correct. Look for red flags and pay attention to the sales and properties the appraiser used as comps.

If it’s clear that your appraisal is biased, you can report it as an act of discrimination. To do so, file a complaint with the Department of Housing and Development (HUD), the Appraisal Complaint National Hotline, your state’s relevant entities or a local fair housing organization.

Incorrect appraisals

Following the appraisal, there may be a large gap between what you think your home is worth and the fair market value defined by the appraiser. While this can be an honest mistake, there’s a chance the appraisal is incorrect.

If you suspect an incorrect appraisal, double-check the appraisal report. Sit down with your real estate agent and look for mistakes, miscalculations or missing data. You can also craft an unofficial appraisal that includes the essential home features and comparisons the appraiser might have missed. Then, contact your appraiser to ask for another appraisal or request that another appraiser look into your case.

Find the best appraisal options for your home

Getting an appropriate home appraisal can be crucial when selling or refinancing your home. Fortunately, there are many different types of appraisals depending on your goals and needs. With the appearance of new appraisal methods like drive-by, hybrid and online options, sellers and appraisal firms have more flexibility than ever.

Pay attention to factors that may hurt your appraisal to ensure you get an appraisal that aligns with your expectations. Compare the prices of different appraisers on a price estimation website, prepare for the appraisal and look out for any bias or mistakes in the appraisal report.