Last updated: December 28, 2023

Home Ownership

Understanding the home appraisal report

Woman sits on the floor of her living room reading getting and understanding of her home appraisal report

When buying or selling a property, one important step in the process is obtaining a home appraisal report. This report provides an expert assessment of the value of a property based on various factors and gives you an idea of whether a sale price is aligned with the current market value of a home.

Definition of a home appraisal report

A home appraisal report is a detailed assessment of a property’s value conducted by a licensed professional appraiser or automated valuation model (AVM) used by a lender. The primary purpose of this report is to determine the fair market value of a property, which is crucial for buyers, sellers, lenders and insurers. The fair market value is the price at which a property might realistically sell in the open market.

Different types of appraisal methods

  1. Sales comparison approach: The sales comparison approach is a common method used in home appraisals. This approach involves comparing the property being appraised to similar properties recently sold in the same area. The appraiser considers factors such as size, location, condition, amenities, and recent sale prices of comparable properties to determine the value.
  2. Cost approach: The cost approach method is typically used for new properties or unique properties that lack comparable sales data. It calculates the value of the property by determining the cost to rebuild it, considering factors such as construction costs, land value, and depreciation.
  3. Income approach: The income approach is typically used for investment properties such as rental units or commercial buildings. It estimates the property’s value by analyzing its income potential based on rental rates, expenses, and potential income growth.

What information determines the report?

The price given in the appraisal is determined by several factors:

  • Recent sales of similar properties in the area
  • Current condition of the property
  • The neighborhood and its impact on future value

These terms are just vague enough to be difficult for many buyers and sellers to understand.

Recent sales

An appraiser will review the records of nearby properties sold from the last few weeks or months to find three or four that are similar in size, style and layout. The selling prices of those homes will help determine the value of the home being appraised. Many buyers and sellers want to know how recently the comparable homes were sold, and what is defined as “within the same area.”

The parameters vary between homes in a metropolitan area and in a rural community. In a larger city, the appraiser could find similar homes that sold in the last month and within one mile of the home that is for sale. In a small town or rural community, that appraiser may have to consider sales over several months or widen the perimeter to encompass the entire town or several miles.

Current condition

An appraiser must evaluate the current condition of the selling property to determine its value. He or she will inspect the home for any health and safety issues. Any violations or risks will be noted in the final report. These may include old wiring, a lack of railing along stairs and many other conditions. In addition, the appraiser will evaluate the overall design of the home. Is it comparable to others in the neighborhood or is it above or below them? A home that needs serious updating will have a lower appraisal value than one that has recently been renovated.

The neighborhood

The surrounding neighborhood also plays a part in the appraisal. The appraiser must determine the current state of the neighborhood and where it is headed in the future. For instance, a home in a new or up-and-coming subdivision will have a higher value today, because it is expected to increase in the future. On the other hand, a home in a tired-looking neighborhood that is declining instead of growing doesn’t have the same potential for value.

Getting an appraisal

The lender will request an appraisal by a licensed appraiser or rely on an automated valuation model (AVM). The seller and buyer cannot be involved in this portion of the process when lender financing is involved, although there may be instances when a homeowner is interested in independently ordering a home appraisal report for informational purposes. The lender will determine the loan amount based on either the sales price or appraisal value, whichever is lower. If the appraised amount is less than the asking price, three things can happen:

  1. The seller may negotiate the price to match the appraisal.
  2. The buyer brings cash to the closing table to pay the difference.
  3. The buyer walks away from purchasing the home.


Adjustments are changes made to the value based on differences between the home being appraised and other recent sales. For example, if most homes in the area have pools and one doesn’t, the value will be adjusted by the expected added value of a pool.

Sellers can ensure that their homes have the most value by fixing things in need of repair and making any necessary updates. With the right renovations and repairs, they can get more money out of their homes. Although buyers do not have any input on an appraisal, it is still important that they understand the process and how it impacts their loan.

What to expect in a home appraisal report

A home appraisal report will arrive as a detailed document that provides an expert assessment of a property’s value. Here’s a rundown of what you can expect to see included in a typical home appraisal report:

  1. Property description: An appraiser will provide information about the property’s location, age, size, and design. The report will also include a description of the property’s condition, noting any significant defects or issues that could affect its value.
  2. Market analysis: The appraiser may provide an analysis of the local real estate market, including recent sale prices of comparable properties in the area.
  3. Comparable sales: The report will typically include a list of recently sold properties that are similar to the appraised property. The appraiser will compare the features of these properties to the subject property and provide a valuation based on these comparisons.
  4. Valuation: The appraiser may provide an estimated value for the property using one or more of the appraisal methods mentioned earlier. The valuation will take into account the property’s location, condition, size, and any unique features.
  5. Photos: The report will typically include several photos of the property, both inside and outside. These photos are used to document the property’s condition and provide evidence of any significant defects.
  6. Additional documents: The appraiser may include additional documents in the report, such as maps, floor plans, or zoning information. These documents provide additional information about the property and its location.
  7. Appraiser’s certification: The appraiser will include a certification in the report stating that they conducted the appraisal in compliance with industry standards and guidelines. The certification also confirms that the appraiser has no interest in the property, that they received no compensation other than the appraisal fee, and that they have no bias or conflicts of interest.

Frequently asked questions about appraisal reports

Why is a home appraisal necessary?

A home appraisal is necessary to determine the fair market value of a property. It helps buyers ensure they are not overpaying, and lenders assess the property’s worth when providing a mortgage.

Who performs home appraisals?

Home appraisals are performed by licensed and certified professional appraisers or mathematic modeling used by lenders. In both cases, knowledge of real estate market trends and experience with valuation techniques are combined to produce the overall report.

How long does a home appraisal take?

Several factors can impact the timing of the home appraisal process. First, scheduling will depend on the type of appraisal being performed, and in the case of an in-personal appraisal, the availability of a professional appraiser in the area. Once an appointment is scheduled, the duration of the home appraisal may vary depending on the size and complexity of a property. When the appraisal is completed, it may take anywhere between a few hours and a few days to receive the final report.

Can I influence the outcome of a home appraisal?

While you cannot directly influence the appraised value, sellers can make sure that the property is in good condition, provide information about recent renovations, and prepare any relevant documents to share with an appraiser. 

Can I use a previous appraisal?

In most cases, previous appraisals are not considered valid for new transactions. Each appraisal is conducted based on the property’s current condition and market conditions.

Closing thoughts: The home appraisal report

A home appraisal report is an essential tool in the real estate process, providing an objective evaluation of a property’s value. Understanding the different type of appraisal methods and common questions about appraisal reports may help both buyers and sellers navigate the appraisal process with confidence. 

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