How Much Does a Home Appraisal Cost?

A home appraisal is a professional property valuation. It’s an essential aspect of the home-buying process, though you may also need an appraisal if you want to refinance.

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The results of your home appraisal are crucial whether you're buying, selling or refinancing a home. This process is essential to all real estate transactions, but many people are uncertain about what it involves — and how much it costs.

The professional appraising the house or apartment must know the local housing market and have no connection to the transaction to ensure impartiality. All states require that anyone providing a home appraisal must be licensed or certified.

During the appraisal, the appraiser will examine the home and the property. They will also research how much similar homes in the area recently sold for and generate a valuation based on the local market and the property's size, features and overall condition.

Generally, a home appraisal inspection takes one or two hours to complete, although it could take longer for large or unusual homes. However, the entire appraisal process usually takes between seven and 10 days because the appraiser will need time to perform research and complete a detailed report.

When Do You Need a Home Appraisal?

Typically, you'll need a home appraisal whenever you take out a mortgage to buy a new residential property. The lender usually orders the appraisal to verify the property's value, although the borrower is responsible for covering the costs. You'll need to have your potential new home appraised before the underwriting process starts. The underwriter will then assess your application and carry out affordability and credit checks to determine whether to approve or deny your mortgage.

Generally, a lender can repossess and sell a property if the borrower defaults on their mortgage. The home appraisal gives the lender reasonable assurance that the property is worth enough for them to recoup any losses.

Similarly, lenders often order a home appraisal if you want to refinance your home. It prevents the homeowner from overborrowing and protects the lender in the event of a mortgage default. Therefore, you won't be able to refinance your home for a higher amount than the appraisal value. The only exception is if you have an FHA mortgage. The FHA Streamline program allows homeowners with these mortgages to refinance without a professional valuation.

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What Happens If the Valuation Is Lower Than Expected?

Sometimes, a home appraisal results in a valuation below the amount the prospective buyer wishes to borrow. In this situation, the lender may refuse to issue a mortgage for the requested amount.

A low appraisal can also affect the seller because they may have to lower the asking price. Asking more than the appraisal value can make it impossible for potential buyers to get a mortgage to purchase your property. It can also deter cash buyers because they won't want to pay more than the house is really worth.

What's Included in a Home Appraisal?

According to Investopedia, home appraisals typically follow the Fanny Mae Uniform Residential Appraisal Report format. The report must include information about the house and the surrounding area, and the appraiser must justify their valuation based on the property's features and local market conditions.

All home appraisals include:

• A local map with the property and all homes used to generate a valuation clearly marked
• A square footage calculation with an accompanying explanation
• A floor plan
• Exterior photographs of the appraised home, all homes used in the valuation and the street view
• Any other information used to value the property, such as public land records and recent sales data

How Much Does a Home Appraisal Cost?

Typically, a home appraisal costs between $300 and $450. Fees can vary by area, and larger homes tend to cost more to appraise than smaller properties. Your home's condition can also affect how much your appraiser charges.

Some appraisers charge by the hour for a home appraisal, while others charge a flat rate per report. Occasionally, an appraiser may ask for a percentage of the property's value, instead of an hourly or fixed fee. It's best to avoid any appraiser working on this basis, as it incentivizes them to overvalue the property and indicates poor practice.