How Appraisers Determine Home Value!

Posted by Rick Delgado on Monday, June 6th, 2022 at 11:56am.

How Appraisers Determine Home Value


If you are looking to buy, sell, or refinance a home, the transaction will almost certainly involve a home appraisal (unless an all-cash buyer is involved). A home appraisal is an unbiased opinion of the value of the home provided by a professional who is licensed or certified and who knows the local area. Federal regulations mandate that the appraiser must be impartial and should have no stake in the sales transaction of the property.


A home appraisal is usually ordered by the lender and paid for by the buyer (or refinancer) with a typical cost running between $300 and $450. The purpose is to ensure that the mortgage amount does not exceed the value of the property so that, should the lender have to resell the property after a default on the loan, they will not lose money.


There are three basic approaches to an appraisal: the cost approach in which the appraiser considers the amount to rebuild the structure based on current building costs, the value of the land, and any depreciation of the property; the comparison approach in which the appraiser looks at recent sales of similar properties in the area; and the income approach which is usually only used for multi-unit structures where rental values need to be considered.


For most homes, an appraisal is a combination of the cost and comparison approaches. For most single-family homes a standard form, the Uniform Residential Appraisal Report from Fannie Mae, is used for the evaluation. The report must include:

  • Photos of the exterior of the home from street, front, and back views;

  • An exterior sketch of the home;

  • A street map showing both the appraised home and comparable sales in the area;

  • Square footage of the home with an explanation of how it was calculated;

  • Photos of any homes used as cost comparisons;

  • Other reports such as tax records, market data on sales, land records, etc. may have been used in calculating value.


To gather this information, an appraiser will make an appointment to spend several hours at the property. Kevin Reifsteck of Huuso Exteriors points out that "A home’s value is based on two things: aesthetic and functionality.”  The appraiser will thus be looking at such things as square footage; the number of bedrooms and baths; whether all elements meet building, safety, and health codes; structural integrity and conditions of the home; the state of major systems such as HVAC and plumbing; and the age and functionality of major appliances. They will also consider exterior concerns, such as structural integrity of roof and foundations, construction quality, driveways and parking, location of the home, and the neighborhood.


After the onsite evaluation, the appraiser will spend time looking at records that indicate the costs of similar homes with similar features in the area and will then submit a report of their opinion of the value of the home. Should the appraisal come in at or above the asking price of the home, all can move forward. If for some reason, the appraisal is lower than the price, there will need to be renegotiation or the seller can ask for a reconsideration if they have substantive evidence as to why the appraisal might be in error.

Ivan Young is a writer in partnership with outdoor kitchen cabinet retailer, Wherever.

Rick Delgado

Wonder what your home is worth in today's market? Quickly find out by clicking here. If you'd like help selling your home, please contact Rick Delgado today.

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