What is a home appraisal?
An appraisal is a written document that shows an opinion of how much a property is worth. It describes what makes the property valuable and how it compares with similar homes nearby. When you borrow to buy or refinance, the lender may need a new appraisal, and it may require you to pay for it. It's different from a home inspection, which checks the home's condition for you, the buyer.
The home appraisal process, step by step
- The lender orders it. You don't pick the appraiser for a mortgage; the lender arranges it, and the fee is usually charged to you.
- The appraiser inspects the home. They measure the living area and note the layout, features, condition and quality of construction.
- They research comparable sales. Recent sales of similar homes nearby are the core of the valuation.
- They adjust and reconcile. Each comparable is adjusted for differences (an extra bathroom, a bigger lot) to arrive at a value for your home.
- The report goes to the lender. You're entitled to a free copy soon after the lender receives it, and no later than three days before closing.
What do home appraisers look for?
- Comparable sales: Fannie Mae requires at least three closed comparables, generally ones that closed within the last 12 months, from the same neighborhood or subdivision when possible. They should be similar in site, room count, finished area, style and condition.
- Location factors: the neighborhood, and outside factors such as a FEMA flood zone.
- Condition, rated C1 (new, never lived in) to C6 (damage that affects safety, soundness or structural integrity).
- Quality of construction, rated Q1 (architect-designed, exceptional materials) to Q6 (basic, low-cost construction).
- Safety and soundness problems, such as roof damage, structural issues, or signs of infestation, dampness or abnormal settlement.
| Condition rating | What it means |
|---|---|
| C1 | New, never occupied |
| C2 | Nearly new or completely renovated; no repairs needed |
| C3 | Well maintained, limited wear, some updates |
| C4 | Minor deferred maintenance; only minimal repairs needed |
| C5 | Obvious deferred maintenance; significant repairs needed |
| C6 | Damage affecting safety, soundness or structure |
If there are safety or structural problems, the appraisal is made "subject to" repairs. Loans on C6 properties can't be sold to Fannie Mae until the problems are fixed to at least C5. Clean, working, well-maintained homes avoid these conditions; tidying up won't change comparable sales, but fixing a leak or a broken handrail can keep a repair condition off the report.
How long is a house appraisal good for?
For a loan sold to Fannie Mae, the home must be appraised within the 12 months before the date of the note. If the appraisal's effective date is more than four months before the note date, the appraiser must do an update (an exterior inspection and a review of current market data, reported on Form 1004D). If the update shows the value has dropped, the lender needs a new appraisal. Other loan programs have their own rules.
How long does it take to appraise a house?
We couldn't find an official, sourced range, so we won't give one. Timing depends on how busy appraisers are locally, how complex the home is and how many good comparables exist. Ask your lender for its expected turnaround when you lock your rate, and build it into your contract deadlines.
What if the appraisal is low?
A low appraisal can mean a bigger down payment, a renegotiated price, or using an appraisal contingency to cancel. If you think the appraiser made errors or missed better comparables, you can ask for a reconsideration of value (ROV). On Fannie Mae loans, the borrower can request one ROV per appraisal report, and the lender must tell you about this right at application. See what a lower value does to your loan-to-value with the down payment calculator and mortgage calculator. For fees, see how much an appraisal costs.
Sources: CFPB: what is an appraisal?; Fannie Mae B4-1.2-04: appraisal age; Fannie Mae B4-1.3-08: comparable sales; Fannie Mae B4-1.3-06: condition and quality; Fannie Mae: reconsideration of value.
Every worked example on this page was checked with Calcist's own engine and an independent reference.