What is a house appraisal? Essentially, it is an opinion from a professional appraiser chosen by the lender and in most cases paid for by the buyer, which places a value on a house based on a few basic criteria. An appraiser will compare the house that is for sale (the Subject Property) to other houses in the area, and will take into consideration the size of the house, basic property value, and special features such as swimming pool, recreation room, finished basement or attic, etc.

The appraisal is a very important part of buying or selling a house, as it protects both the buyer and the lender. Based on standard values and the results of the appraisal report, the lender and buyer both will have an accurate value of the house. Upon completion of the appraisal all interested parties will know the lending value of the house and how it compares to the surrounding area. Lenders require an appraisal because it ensures that they will be able to recoup their money should the buyer default on the loan. An appraisal also prevents the buyer from paying too much for a home.

Features that improve the appearance of a property will increase the amount that it appraises for. For instance, freshly painted walls will count positively towards the value of the home, as will a well-landscaped property or recently remodeled kitchen. On the other hand, problems with the house, such as instances where the foundation is cracked, or old appliances, carpet, and roofing, will result in a lower appraisal. The surrounding property values and the real estate market will also affect the appraised value and the ease of access to the property is also considered and evaluated.

There are two primary types of appraisal methods. One is the Sales Comparison and the other is a Cost Approach method. A Sales Comparison is just what it sounds like. The appraiser uses the sale prices of a couple of nearby properties with similar features as the subject property and compares their condition and features to come up with a reasonable sale price for the subject property. With the cost approach method the value of the house is determined based on what it would cost to replace the subject property. Since this is difficult to determine with older homes, the cost approach method is best for homes that have been recently built.