A real estate appraisal is a structured process where a licensed appraiser inspects a property, researches the market, and produces a written opinion of its fair market value for a lender, buyer, or owner.
Main purposes
- Confirm a home is worth at least the amount a buyer is borrowing (purchase or refinance).
- Provide an unbiased value estimate for situations like divorce, estate settlement, tax appeals, or private valuation.
Key steps in the process
- Order and scheduling
- A lender or client orders the appraisal and assigns a licensed or certified appraiser who is independent of the buyer and seller.
- The appraiser schedules a time to access the property (interior and exterior) or, in limited cases, conducts an exterior-only or “drive‑by” appraisal.
- On-site property inspection
During the inspection, the appraiser typically:- Walks through the interior and around the exterior, noting age, layout, quality of materials, visible defects, and overall condition.
- Measures or confirms square footage and room counts (bedrooms, bathrooms, finished areas, basement/roof type).
- Documents permanent improvements or upgrades (kitchen/bath remodels, added rooms, new roof, HVAC, etc.).
- Takes photographs of interior rooms, exterior elevations, and the street view for the report.
- Market and data analysis
After the visit, the appraiser:- Researches comparable recent sales (“comps”)—similar homes nearby that sold in the last few months—and adjusts for differences (size, condition, features, location).
- Reviews public records, MLS data, tax records, and local market trends to understand price levels and demand.
- May use one or more valuation approaches (sales comparison for most homes, cost approach for new construction, income approach for rentals/investments).
- Preparing the written report
The final appraisal report usually includes:- Basic property and owner information, legal description, site details, zoning, and taxes.
- A building sketch, explanation of how square footage was calculated, photos of the subject property and of each comparable sale.
- A grid comparing the subject to each comparable sale, with dollar adjustments and comments.
- The appraiser’s final opinion of value, effective as of a specific date, plus supporting reasoning and market commentary.
What appraisers look at
Typical factors include:
- Location, neighborhood type (urban/suburban/rural), proximity to jobs, transport, schools.
- Lot size, topography, view, and any adverse conditions (flood risk, easements, encroachments).
- Home size (total and finished area), layout and functionality.
- Age and condition of structure, foundation, roof, systems (plumbing, electrical, HVAC), and overall maintenance.
- Quality of construction and finishes, amenities (garage, balcony, pool, fireplaces, built‑ins).
- Recent renovations or permanent improvements and their quality.
- Local sales trends and price ranges for similar properties.
How it affects a transaction
- For buyers and lenders: If the appraisal is lower than the contract price, the buyer may need to renegotiate, increase the down payment, or change financing; if it’s higher or equal, the loan can usually proceed as planned.
- For sellers: An appraisal that comes in low can pressure price reductions or cause deals to fall through; a strong value can support the agreed price.
- For owners (refinance or equity loans): The appraised value determines how much equity a lender will recognize for a new loan.
If you tell me whether you’re buying, refinancing, or just curious about your home’s value, I can outline exactly what to expect in your specific situation.