How a Home Appraisal Works and How Much It Costs

When you apply for a home loan, a lender will usually require an appraisal of the property, whether you're buying a house or refinancing a mortgage.

What is a home appraisal?

A home appraisal is a licensed or certified appraiser's opinion of a home's value. The appraisal is based on research of recent sales of comparable homes in the area, an analysis of the property and the appraiser's judgment.

The mortgage lender requires an appraisal to help gauge risk of making a loan. The property serves as collateral in case the borrower defaults, so the lender wants to make sure the loan isn't too big compared with the property's value.

How does a home appraisal work?

Typically, an appraiser conducts an in-person visit to evaluate a home’s interior and exterior. However, there are fundamentally three appraisal types.

• Traditional full appraisal: A full appraisal involves an in-person inspection of the interior and exterior of the property, including the condition, features and any renovations. The appraiser documents the visit through photographs and notes.

• Drive-by appraisal: Also known as an “exterior-only appraisal,” a drive-by appraisal involves the appraiser examining the outside of the home. They take into account curb appeal, structural issues and visible wear and tear, while relying on market data for home interior information. They’re primarily used when interior inspections aren’t feasible or if the loan is viewed as low-risk.

• Desktop appraisal: With this appraisal type, appraisers do not examine the house in person. Instead, they complete the property review remotely, leaning on public real estate records, such as property tax assessments and registries of deeds. They may also obtain information from the internet, the buyer or seller’s agent and local multiple listing services.

The lender orders the appraisal and dictates the appraisal type based on the circumstances. While the traditional appraisal remains the gold standard for accuracy and regulatory compliance, the alternative models — offering the benefits of greater efficiency and accessibility — are becoming increasingly more accepted.

How much does a home appraisal cost?

A home appraisal typically costs between $300 and $500, with a national average of $358, according to HomeAdvisor, a digital marketplace for home services. But home appraisal quotes can start at $600 in some metropolitan areas, and fees can exceed $1,000 for larger or more complex properties.