Home Appraisals Made Simple: What Every Buyer and Seller Should Know

For a buyer, an appraisal tests whether the price is supported by what similar homes sold for. When a mortgage is involved, the lender may require one and may require the buyer to pay for it, according to the Consumer Financial Protection Bureau. If the value comes in below the price, the Bureau says a buyer may consider renegotiating or reviewing the appraiser's work. A buyer who wants an independent opinion may also obtain one, at extra cost.

For a seller, an appraisal documents a value before pricing, so the listing price rests on evidence. It also prepares the seller for a buyer's lender, who will order an appraisal of its own. The seller provides access, a list of improvements and documents that describe the home.

The appraiser does not take sides and does not set the price. The report states a value as of a date. A buyer and seller who read the same comparable sales understand the number better than ones who see only the total.

Does the appraiser want to meet the buyer or seller? Someone should open the property and answer questions about changes. Ask the appraiser who is needed at the visit.

Can the seller prepare? Yes: make every area accessible and prepare a dated list of improvements and repairs. Preparing does not change the value, but it helps the report describe the home accurately.

What does the buyer get? For a typical mortgage, the borrower receives a copy of the lender's appraisal, generally promptly and no later than three business days before closing unless the timing is waived.

What if the buyer and seller disagree about the number? The appraisal is one piece of evidence. Both sides can read the comparable sales and decide what to do next.

• Effective date: the date the value applies to.
• Intended use: what the value is for, such as a sale, an estate or a settlement.
• Intended users: the people the report is written for. Recipients, who actually get a copy, are agreed in the engagement and can differ.
• Comparable sale: a recent sale of a similar property used as evidence.
• Adjustment: a change to a comparable sale's price for a difference from your property.
• Scope of work: what the appraiser did and did not do to reach the value.
• Limiting conditions: assumptions the conclusion depends on.

The five steps, the preparation checklist and the method are covered in how appraisers determine home value and why homebuyers need an appraisal.