Before you insert a key into the front door of your new home, a home appraisal is a key component to the homebuying process. 


Because an appraisal determines a home’s value so that lenders can first make sure homeowners are not over-borrowing for a property (which serves as protection should the homeowner default on the mortgage). A low appraisal can arm you with the ability to negotiate the seller’s price.

Here’s a breakdown of the appraisal process to make it more understandable for homeowners, buyers and sellers. 

Who is an appraiser?

A professional real estate appraiser, according to the Appraisal Institute, should be licensed or certified, which is required in all 50 states, be familiar with the local area and have an unbiased, impartial evaluation. Keep in mind that, technically, appraisers confirm a property’s value rather than determine the value. To do so, they will have experience in appraising homes similar to yours and in resolving the value for a buyer and seller to agree on in a contract.

How is an appraisal determined?

The all-important home walkthrough by an appraiser is gathered into a standard residential appraisal report, which is influenced by recent similar sales and current market trends. (The appraisal usually costs a few hundred dollars, paid by the loan borrower.)

The more detailed elements of the report include:

  • Home exterior. The appraiser inspects the overall structure, building materials and foundation.
  • Home interior. Interior building materials are assessed, such as flooring, light fixtures, windows and doors. Square footage and number of bedrooms are also counted in. The home’s value isn’t based on interior décor, however, a clean, staged home could increase its value.
  • Amenities. The extra comforts of home add up, including central air, custom window treatments, security systems, carbon monoxide detectors and more.
  • Upgrades. These could definitely increase a home’s value: remodeled kitchen (new cabinetry, appliances, countertops) or bathroom. Sellers, be sure to keep receipts to show the invested costs.

Once the walkthrough is complete, the appraiser will use either the sales comparison approach, the cost approach, or a combination of both to get to the bottom of the most accurate home value:

  • Sales comparison. Just as the name implies, this popular method comes up with a home’s fair market value by comparing it to similar homes, or “comps,” that have recently sold nearby. But the appraiser is sure to consider the detailed differences and make adjustments accordingly, like lot size, amenities, fixtures, finishes and more. 
  • Cost. This strategy calculates the cost to rebuild the entire home by considering: the value of the lot; the cost of reproducing the home; the home’s age and condition (factoring in depreciation); and exterior improvements, like pools, decks, landscaping. The replacement value is then the result of the lot value plus the total value of improvements and depreciation.

The finished appraisal report will reveal an accurate, detailed description of the home, inside and out, as well as: the appraiser’s opinion of the neighborhood and surrounding area; a list of parks, schools, shopping and entertainment venues accessible near the home; three comps with features; a street map; any problem areas in exterior/interior; interior/exterior photos; an exterior building sketch; records like public tax, public land and market sales data; and, of course, the appraised value. 

For more tips and advice on the homebuying process, or to set up an appointment with our expert real estate agent. Call us on 843.839.4878 or fill in this short contact form.