What a home appraisal is
The Consumer Financial Protection Bureau describes an appraisal as a written document that shows an opinion of how much a property is worth, and as an independent assessment of the property's value. It can also show how the property compares with others in the neighborhood. The report always names the property, the date the value applies to and the people who may rely on it.
At a glance
How it differs from other estimates
| Estimate | Who requests it | Who performs it | What is examined | What it is used for |
|---|---|---|---|---|
| Appraisal | A lender, owner, attorney or executor | A state-licensed or certified appraiser | The property compared with similar sales; usually a visit, though some mortgage programs allow other scopes | A price, a loan, a settlement or an estate |
| Broker price opinion | A lender or an owner | A real estate professional | A limited review of the property and the market | A rough guide to price |
| Automated valuation | A lender or an owner | A computer model | Data about the property; no visit | A quick estimate from mathematical models |
| Home inspection | Usually a buyer | A home inspector | Condition of the systems and structure | Repair requests or a decision to proceed |
The Consumer Financial Protection Bureau lists the first three as the valuation types a lender may use, and describes the appraisal as the most common. An inspection answers a different question, as the page on appraisal versus home inspection explains.
Reading the first page of a report
The first page tells you what the rest rests on. Check the property address, the effective date, the purpose, the intended users and the scope of work. If the scope of work is not what you expected, ask before you rely on the number. Intended users are the people the report is written for, and recipients are the people who actually get a copy. They are agreed in the engagement and are not always the same.
Why it matters
In a sale, an appraisal documents a value before pricing. In a purchase with a mortgage, a lender may require one and may require you to pay for it. In an estate, it states a value as of a stated date, often the date of death. In a divorce, it gives both sides the same number at an agreed date. In each case the appraisal is the evidence that makes the number credible.
What affects the value
Location, size and layout, condition and upgrades, the site, and the state of the market at the effective date all matter. None has a fixed dollar effect. The appraiser reads the market's reaction to differences from recent comparable sales. The article on how a home appraisal works shows the steps, and how appraisers determine home value shows the method.
Frequently asked questions
Who orders a home appraisal?
The lender, the owner, an attorney or an executor, depending on the purpose.
How long is an appraisal valid?
It is a value as of its effective date. How long it stays useful depends on the purpose, who is relying on it and changing conditions, and a lender may have its own rules about updates.
Does an appraisal guarantee a sale price?
No. It states a value, and a sale price is what a buyer and seller agree.
Who can perform one?
A state-licensed or certified appraiser. You can check the state record by name.