How Long Does A Home Appraisal Take?

How Long Does A Home Appraisal Take?

Home appraisals typically take 7 to 10 days.

What Is A Home Appraisal?

A home appraisal is an unbiased estimate of the value of a home. It is used in the process of buying and selling a home to determine whether the sale price agreed upon is consistent with its actual value.

A home appraisal is one of the tools a mortgage lender uses to determine whether they should approve giving a loan or whether to refinance an existing home mortgage. It makes sense – if you were going to give someone hundreds of thousands of dollars to help them pay for a house, wouldn’t you want to know whether the house they are buying is worth that amount? After all, if they default on their loan, and you end up owning that house through foreclosure, you would want a home you could sell and get your money back.

What Happens In A Home Appraisal?

When a home is appraised, a licensed, non-biased appraiser will visit the property and will spend several hours inspecting the house’s exterior and interior (yes, if you live in the property being appraised, you will need to allow them to walk through your home.)

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Note: if the appraisal is being performed for a refinancing of the property, the lender may not request an interior inspection, so the appraiser may not need to enter your home. Ask your lender whether an interior review will be part of the appraisal so you know what to expect.

During that visit, they will take pictures, measure its square footage, and evaluate its features. The inspector will look at items that influence the home’s value, like does it have granite or Formica countertops, hardwood floors or linoleum, a garage or a carport, and central air conditioning or not. Though they are not specifically looking at the condition and repairs needed in the home (that’s the job of the home inspector), they will take note of and report obvious issues that would reduce the value of your home like broken windows, overgrown landscaping, insect infestation, dampness, settlement, and other obvious repair needs.

In addition, the appraiser will look at 

• How this property compares to others in the area, the recent selling prices of those with similar value (called “comps” which stands for comparative prices), and the amount of time those properties spent on the market before they sold
• Square footage of the home and the land 
• Public land records
• Public tax records, zoning, and assessments
• Other properties in the area (a home’s value will decrease if it is located close to a junkyard, busy street, apartment complex, commercial properties, high power lines, etc.)
• The overall curb appeal of the home 

What Does An Appraisal Report Look Like?

Typically, an appraiser will use Fannie Mae’s Uniform Residential Appraisal Report as the basis of their work. I’ve linked to it above because it’s well worth reading so you know what an appraiser is looking for.

In the end, their report will include

• Their estimate of the value of the property
• How they determined that value using one of three methods:
  • The market data or sales comparison report (basing the value of that home on recent sales of other similar properties in the area)
  • The cost approach (which adds an estimate of the cost to improve the property)
  • The income approach (used for rental properties, which bases the value on an estimate of the amount of rental income that the property can provide)
• An overview of the property, including square footage, age, location, number of bedrooms and bathrooms, landscaping, design, quality of construction, the type of ownership (owned or leased), etc.
• Issues – like structural damage, lack of upkeep, design defects, general condition of the property, location on a flood plain, landscaping quality
• Local market trends – local and national trends that can influence the value of the property, like zoning issues and market valuations trends in that part of town
• Other issues – like easements or encroachments or other information they know of that can affect the value of the property.
• A street map showing the location of the property and the comparable sales used in the analysis
• A sketch showing the exterior of the building
• Photographs of the front, back, and street view of the home, and front views of comparable properties considered

What Makes A Property Comparable?

One of the key elements of an appraisal is the identification of comparable properties to the one being appraised, to see what they sold for and how long were they on the market. These are usually referred to as “comps.”

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So, what makes a good comp?

Appraisers are looking for three factors to identify a comparable property:

1. Most recent sales
2. Most proximate sales (closest geographically)
3. Most similar (size, condition, age, similar in price range, etc.)

The selection of comps can create problems in an appraisal. If the appraiser selects properties that are not really comparable to the one being appraised, the valuation can be different than it could be if more accurate comparison properties were chosen.

Who Pays For The Appraisal?

The buyer usually pays for the appraisal (and the cost is usually included in their closing costs):

• If the appraisal is for a property being purchased, the buyer pays for the appraisal (which will be charged as part of their closing costs.)
• If the appraisal is part of a refinance, the person receiving the loan pays for the appraisal.

How Much Does An Appraisal Cost?

Home appraisals typically cost between $300 and $550. Prices could change based on the location of the property, its size, and location. 

How Could The Appraisal Affect The Purchase Process?

If the appraised value comes in significantly lower than the agreed-upon purchase price, and the offer listed the appraised value as one of the conditions of sale (an appraisal contingency,) the buyer may want to renegotiate the price of the home. If there is no agreement after renegotiating, the buyer has the right to walk away and get their deposit back.

Also, if the appraised value is significantly lower than the purchase price, the mortgage lender may limit the amount of money they will loan for the home. This could result in a renegotiation of the price or the buyer may need to provide a bigger down payment to be able to purchase the home.

If the appraised value comes in significantly higher, it is likely that nothing will change in the deal – the buyer just got an incredible deal and the seller likely can’t force a price negotiation.

Who Orders And Processes An Appraisal?

Ordering and processing the results of an appraisal is usually the responsibility of the mortgage lender, so you usually don’t have to worry about it. It should just happen as part of the approval of your loan.

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Will An Appraisal Delay The Loan Approval Process?

Usually not. Lenders usually order an appraisal right at the beginning of the loan approval process. Since the other steps in the appraisal process take longer to complete than the 7 – 10 days required for the appraisal to be completed, so appraisals usually don’t affect the timing of a loan.

How To Dispute A Home Appraisal

Sometimes sellers find that an appraisal on their property comes in significantly lower than expected. What can you do if you disagree with an appraisal?

You have the right to challenge that appraisal. 

1. Start by getting a copy of the appraisal. You need to know exactly what they said. Unfortunately, you don’t have a legal right to demand a copy from the lender or the appraiser, because the buyer paid for it. But you can request a copy from the buyer.
2. Look for errors in the appraisal. Though there may be factual errors in the appraisal, usually the best thing to challenge is the comps they selected. They may have chosen comps from an inappropriate neighborhood, or you may know of other comps that would be better matches for your property. You may not be able to get them to change, but it’s worth trying.
3. Point out things they missed. Since the appraiser was probably in your home for a short time, they may have missed key improvements that would change the value of your home. 
4. Request another appraisal. If the three steps are named above, you can request another appraisal from another appraiser. You will very likely have to pay for it and you’ll be more likely to succeed in this effort if you can point out specific errors in their original appraisal.

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