What a home appraisal is and when you need one

A home appraisal is an independent assessment of your property's market value, conducted by a licensed professional called an appraiser. The appraiser inspects the house, measures it, examines its condition, and compares it to similar homes recently sold in your area. The result is a written report with a dollar value — this is what lenders use to decide how much they will loan you, and it is also what buyers use to negotiate price.

You will encounter an appraisal in three main situations: when you are buying a home with a mortgage, when you are refinancing an existing mortgage, or when you need to know your home's value for insurance, tax assessment disputes, or estate purposes. If you are paying cash for a home, an appraisal is optional — you can order one if you want, but no lender requires it.

Key Takeaways

  • An appraisal is ordered by your lender, not by you, and typically costs between $300 and $500 depending on the home's size and location.
  • The appraiser will spend one to three hours inside and outside your home, measuring rooms, noting condition, and comparing your property to recent sales of similar homes nearby.
  • If the appraisal comes in lower than the purchase price, you have three options: renegotiate the price with the seller, make up the difference in cash, or walk away from the deal.
  • You can request a copy of the appraisal report from your lender after it is complete, and you have the right to challenge it if you believe the value is wrong.

Who orders the appraisal and who pays for it

Your lender orders the appraisal, not you and not the seller. The lender hires an independent appraiser to protect their own money — they want to make sure the house is actually worth what you are borrowing against it. You pay for the appraisal as part of your closing costs, typically between $300 and $500, though the exact amount depends on the home's size, location, and local market rates. In some cases the cost is higher — rural properties, new construction, or homes in areas with few comparable sales may cost more to appraise.

The lender chooses the appraiser from a pool of licensed professionals in your area, and you do not get to pick them. This independence is intentional: if you could choose the appraiser, there would be a conflict of interest. The appraiser's job is to give an honest value, not a value that helps you get the loan.

What happens during the appraisal inspection

The appraiser will contact you or your real estate agent to schedule a time to visit the property, usually within one to two weeks of the lender ordering the appraisal. The inspection itself takes one to three hours depending on the home's size. The appraiser will walk through every room, measure the square footage, note the condition of the roof, foundation, walls, flooring, kitchen, bathrooms, and major systems like heating and electrical. They will also look at the lot size, driveway, garage, and any outbuildings.

You do not need to be present during the appraisal, though you can be. If you are there, the appraiser may ask you questions about recent renovations, when the roof was replaced, or whether there are any problems with the house. Be honest — the appraiser will discover major issues anyway, and lying does not help you. After the inspection, the appraiser leaves and begins writing the report, which usually takes five to ten business days.

How the appraiser determines value

The appraiser uses three main methods to arrive at a value. The most common is the sales comparison approach: the appraiser finds three to five homes similar to yours that sold recently in your area — same size, age, condition, and neighborhood — and adjusts their prices up or down based on differences. If your home has a newer roof and theirs does not, the appraiser adds value. If your home is smaller, they subtract.

For newer homes or in areas with few sales, the appraiser may also use the cost approach, which calculates what it would cost to rebuild the house from scratch, then subtracts depreciation. For rental properties or investment homes, the appraiser may use the income approach, which bases value on the rent the property generates. Most appraisals rely heavily on the sales comparison method because it reflects what actual buyers are willing to pay right now.

The appraiser also considers the neighborhood, school district, proximity to jobs and shopping, crime rates, and whether the area is appreciating or declining. A house in a neighborhood where values are rising will appraise higher than an identical house in a neighborhood where values are falling.

What to do if the appraisal is lower than the purchase price

If the appraised value is less than what you agreed to pay, you have a problem: the lender will only loan you up to the appraised value. If you agreed to pay $300,000 and the appraisal comes in at $280,000, the lender will only loan $280,000. You now have three choices.

First, you can renegotiate with the seller. The appraisal is now evidence that the house is worth less than the asking price. You can ask the seller to lower the price to match the appraisal, or to split the difference. Many sellers will negotiate at this point because they know you have a legitimate reason to back out if they refuse.

Second, you can make up the difference in cash. If you have $20,000 in savings and the appraisal is $20,000 short, you can pay that $20,000 out of pocket and proceed with the original loan amount. This is called "bringing cash to closing."

Third, you can walk away from the deal. Most purchase agreements include an appraisal contingency, which means you can cancel the contract if the appraisal comes in low and the seller will not renegotiate. You will lose any inspection fees you paid, but you will not lose your down payment or be forced to buy a house you now know is overpriced.

Challenging an appraisal you believe is wrong

If you think the appraiser made a mistake — missed a recent renovation, undervalued the neighborhood, or used the wrong comparable homes — you have the right to challenge it. First, request a copy of the full appraisal report from your lender. Read it carefully and note any errors: wrong square footage, missing rooms, incorrect comparable sales, or factual mistakes about the property.

If you find errors, contact your real estate agent or lender and ask them to request a reconsideration of value from the appraiser. Provide evidence: photos of renovations, documentation of recent repairs, or a list of comparable homes the appraiser missed. The appraiser will review your evidence and either revise the appraisal or stand by the original value. This process usually takes five to ten business days and does not cost you anything.

If the appraiser refuses to budge and you still believe the value is wrong, you can order a second appraisal at your own expense, though this is rare and expensive. Most lenders will not accept a second appraisal unless there is clear evidence the first one was fraudulent.

Appraisals for refinancing and other purposes

If you are refinancing your mortgage, your lender will order a new appraisal to make sure the home's value has not dropped significantly. Refinancing appraisals work the same way as purchase appraisals: an independent appraiser inspects the home and compares it to recent sales. You pay the appraisal fee, usually $300 to $500, and it is rolled into your closing costs.

If you need an appraisal for other reasons — to challenge your property tax assessment, to settle an estate, or to determine insurance value — you can hire a private appraiser directly. You will pay the full cost out of pocket, and the appraisal will be yours to use however you need. Private appraisals typically cost the same as lender-ordered appraisals but may take longer because you are not part of a lender's standard timeline.

Frequently Asked Questions

Can I be present during the appraisal?

Yes, you can be home during the inspection. Some appraisers prefer you are not there so they can work without distraction, but most will answer questions about recent work you have done. If you are present, point out any improvements the appraiser might miss — a new roof, updated electrical, or finished basement — but do not argue with the appraiser's conclusions.

How long does the appraisal process take?

The inspection itself takes one to three hours. The appraiser then has five to ten business days to write and submit the report to your lender. Your lender will share the report with you within a few days after that. The entire process from order to report in your hands usually takes two to three weeks.

What if I disagree with the appraised value?

Request the full appraisal report and look for factual errors: wrong measurements, missing rooms, or incorrect comparable homes. If you find errors, ask your lender to request a reconsideration of value. Provide evidence like photos or repair receipts. The appraiser will review and either revise or stand by the original value.

Does the appraisal affect my property taxes?

No. The appraisal your lender orders is private and does not go to your local tax assessor. Your property taxes are based on the assessed value your county or municipality determines, which is separate. You can challenge your tax assessment independently if you believe it is too high.

What happens if the appraisal is higher than the purchase price?

You are in a good position. The lender will loan based on the appraised value, which is higher than what you are paying. This means you have when ready equity in the home and you are not overpaying. The sale proceeds normally with no complications.