Navigating the Home Appraisal: A Buyer’s Guide

You’ve put in your bid for the home you want. Now you await the appraiser’s report. What’s going on behind the scenes?

How the Appraisal Works in Most Cases

Image of reading glasses and cash sitting on top of a clipboard holding appraisal paperwork. Captioned: How the appraisal works in most cases

The typical home appraisal relies mainly on local sales comparisons, or comps. What will other buyers pay now for a house like the one you’re buying? Whatever price others will pay for similar homes is roughly the value of your new home.

What’s a similar home? The appraiser considers homes within a certain radius of the one you’re buying, with comparable bedroom and bathroom counts, the same or similar size and construction type. Comparable homes have the same school district or a similarly ranked school district, and similar amenities nearby. The appraiser studies and compares sales information and recorded documents for the homes. Homes sold in the last three months are considered the most relevant comparisons.

Even similar properties are unique homes, of course. Therefore, the appraiser will find enough variety in the data to come up with a range of reasonable valuations. Some comparable properties might have been sold for more than the market value, others at below-normal prices, and so forth. Once the outliers are understood for what they are, an appraiser needs to figure out where your desired house fits among slightly more and slightly less costly properties.

The expert’s professional discretion explains why, many times, the appraisal will come back with a valuation very close to the price you offered and the seller has accepted. As long as your agreed-upon purchase price falls within the data-supported range of value calculated by the appraiser, a buyer usually gets an appraisal that matches what the buyer and seller think the home is worth.

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