How does a home appraisal really work?

Home appraisals are typically required during the home buying process in order to determine the current fair market value of the home. 

The home appraisal process is a combination of science and opinion—but mostly science, even though the value that the appraiser delivers is called an “opinion of value” as of the effective date of the appraisal. 

Here’s an overview of how the process works:

Home appraisal checklist

First, the appraiser describes the house being appraised (the “subject”) in a standard format. Most appraisers use a Uniform Residential Appraisal Report noting detailed internal and external basic conditions including the following:

  • living space in square feet
  • lot size
  • view
  • location and neighborhood
  • amenities
  • gutters
  • siding, etc.

Comparable homes

Next, the appraiser lists at least three other similar properties (comparable sales, or “comps”) that have sold recently, generally within six months. The comps should also be near the subject.

The appraiser will describe the comps in the same standardized way applied to the subject home—except a combination of MLS data and public records will also be included. Then, the appraiser will apply dollar adjustments to make the comps the equivalent of the subject.

If one of the comps is 200 square feet larger than the subject, for example, the appraiser will apply an adjustment based on the square footage. Using $75 for an example: The appraiser would adjust the sales price of that comp downward by $15,000 (200 x $75). They will follow the same steps for other aspects of the property, such as condition, upgrades, pool or spa, view, etc. This will give an Adjusted Price for the comp.

They will continue to go through the same process for each of the comps.

The appraiser will put the comps in order, starting with the one the most like the subject. Then, they’ll calculate a weighted average of the comps to arrive at an “opinion of value.”

It’s important to realize that only the properties that have sold will figure into the weighted average. Properties on the market will appear only to show the state of the market, not the price of properties.

Appraisal results

The appraiser will write a narrative report describing the condition of the property and in general explaining how they arrived at the opinion provided. In addition, the appraisal report will provide inside and exterior photos of the subject and its neighborhood, along with exterior photos of the comps.

Appraisers are really evaluating what’s permanently part of or attached to the house. A messy home will likely appraise for the same amount as it would in model home order. And, upgrades, like ultra-premium carpeting and drapes, are not likely to make a significant difference on its appraised value—even though high-end decorating could ultimately bring a higher sales price.

Getting appraisal results can take anywhere from a week to a few weeks.  

Lenders will use the appraised value of a home to determine whether the amount of money requested by the borrower seems appropriate.

The final home appraisal provides a snapshot of a home’s value during a specific time. Market values continually change throughout the life of a home.

Note: Sellers will not automatically receive a copy of the appraisal report but may request one.  


Beginning the home buying journey the very first time can be a bit intimidating, but it doesn’t have to be. Here’s an overview of the home buying process in five steps.

Contact a Bank Midwest mortgage banker for more information about home financing options.


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