A home appraisal is an independent professional opinion of what your property is worth on a specific date, and for a standard single-family house it usually costs between $400 and $900. Lenders require one before approving a mortgage so they can confirm the home is worth at least what you’re borrowing against it. The buyer typically pays, the appraiser visits the property, and the written report lands with the lender a week or two later.
What a Home Appraisal Is and When You Need One
An appraisal is a licensed appraiser’s valuation of a specific property at a specific point in time. It’s not the same as a home inspection, which looks at condition and safety, and it’s not the same as the “estimated value” you see on real estate websites.
You’ll run into an appraisal requirement in a few situations:
- Buying a home with a mortgage. The lender orders the appraisal to protect the loan.
- Refinancing. The new lender needs to confirm current value.
- Settling an estate or dividing property in a divorce.
- Disputing a property tax assessment.
- Claiming a charitable deduction for donated property worth more than $5,000, where the IRS requires a specific type of “qualified appraisal” that goes beyond a standard mortgage report.
This article is about the mortgage and refinance appraisal most homeowners actually encounter. The IRS qualified appraisal for donations and estates has its own rules about who can sign it, how the fee can be structured, and when it must be dated.
What a Home Appraisal Costs and Who Pays
For a typical single-family home, budget $400 to $900. Remote properties, multi-unit buildings, and commercial real estate run higher, sometimes into the $1,000 to $1,300 range. FHA appraisals tend to cost slightly more than conventional ones because the property-condition requirements are stricter.
In a purchase, the buyer almost always pays, even though the lender orders the report and the report primarily protects the lender. The fee is either collected upfront or rolled into closing costs. In a refinance, the homeowner pays. A seller can order a pre-listing appraisal to help set an asking price, but that one won’t satisfy the buyer’s lender later.
What Happens During the Appraisal
Once the lender orders the appraisal, the appraiser calls to schedule an on-site visit. For a standard home the walkthrough takes 30 to 90 minutes. The appraiser measures the exterior, walks every interior room, and notes the condition of the roof, HVAC, plumbing, and electrical systems. They look at materials, layout, and value-adding features like a finished basement or an updated kitchen, and they photograph the property inside and out.
After the visit, the appraiser cross-checks what they saw against public records, tax data, and recent comparable sales from the Multiple Listing Service. Everything goes into a formal report that gets transmitted to the lender. Most residential reports are finished within one to two weeks of the inspection.
The work follows the Uniform Standards of Professional Appraisal Practice, known as USPAP.1The Appraisal Foundation. USPAP USPAP requires the appraiser to be independent, impartial, and objective, to identify every characteristic that affects value, and to report conclusions in a way that isn’t misleading.
Desktop and Hybrid Appraisals
Not every appraisal requires a physical walkthrough. Fannie Mae permits desktop appraisals on certain purchase loans where the appraiser works entirely from public records, MLS listings, and other data sources. To qualify, the property must be a one-unit principal residence, the loan-to-value ratio must be 90% or lower, and the loan must receive an Approve/Eligible recommendation from Fannie Mae’s automated underwriting.2Fannie Mae. Desktop Appraisals
A hybrid appraisal splits the work: a trained third party inspects the property and gathers data, and the licensed appraiser analyzes it and writes the report. When your property and loan qualify, your lender may give you a choice among traditional, hybrid, and desktop options.
How the Appraiser Arrives at a Value
The profession recognizes three valuation methods, and residential reports lean heavily on the first.
Sales Comparison Approach
This is the workhorse for homes. The appraiser identifies recently sold properties similar to yours in size, location, condition, and features, then adjusts for the differences. Fannie Mae’s forms require a 12-month comparable sales history.3Fannie Mae. Sales Comparison Approach Section of the Appraisal Report If a comparable sold for $350,000 but had a two-car garage and your home has a one-car garage, the appraiser adjusts the comparable downward to reflect that difference, and the opposite when your home has features the comparable lacks.
Cost Approach
For new construction or unusual properties where good comparables don’t exist, the appraiser estimates what it would cost to rebuild from scratch at today’s materials and labor prices, subtracts depreciation for age and wear, and adds the land value. The approach loses reliability on older homes because depreciation becomes harder to estimate.
Income Approach
Rental and commercial properties get valued on the income they generate. The appraiser calculates net operating income (rent minus operating expenses) and divides by a capitalization rate drawn from comparable investment sales. A building producing $100,000 in net operating income in a market with a 7% cap rate works out to roughly $1.43 million.
What to Have Ready Before the Appraiser Arrives
Most residential appraisals use the Uniform Residential Appraisal Report, also called Fannie Mae Form 1004, which requires details about the tax parcel number, zoning, and neighborhood.4Fannie Mae Selling Guide. Appraisal Report Forms and Exhibits Pulling a few things together ahead of time helps the appraiser capture value you might otherwise leave uncounted:
- The property deed and survey, which confirm legal boundaries and lot size. Check your closing documents or the county recorder’s office.
- Receipts and permits for renovations, such as a kitchen remodel or new roof. The appraiser can’t credit upgrades they don’t know about.
- Documentation of known defects, such as foundation repairs or old electrical. Disclosing these upfront supports the report’s credibility.
- Any recorded easements, shared driveway agreements, or HOA restrictions that affect how the land can be used.
How Long an Appraisal Stays Valid
An appraisal has a shelf life, and the length depends on the loan type.
- Conventional loans (Fannie Mae and Freddie Mac): valid for 12 months from the effective date. If more than 120 days have passed, the lender must get an appraisal update before using the original report.5Fannie Mae. Appraisal Age and Use Requirements
- FHA loans: the initial appraisal is valid for 180 days from the effective date, and an update can extend that to one year from the original effective date.
If the appraisal expires before closing, you’ll pay for a new one. Some lenders apply tighter internal timelines in a fast-moving market where values are shifting quickly.
Getting and Reading Your Copy
Your lender is required to give you a copy of the appraisal whether you ask for it or not. Under Regulation B, which implements the Equal Credit Opportunity Act, lenders must deliver copies of all appraisals and written valuations either promptly on completion or at least three business days before closing, whichever comes first.6Consumer Financial Protection Bureau. Factsheet: Delivery of Appraisals If you’re using an FHA loan and switch lenders mid-process, the original lender has to transfer the appraisal to the new one at your request, and neither can charge a separate fee for the transfer itself.
Read it carefully when it arrives. Look for factual errors: wrong square footage, a missing bathroom, comparables that don’t look like your home. Those are exactly the kinds of concrete problems that support a successful challenge if the number came in low.
What to Do if the Appraisal Comes in Low
A low appraisal doesn’t automatically end the deal, but it creates a financing problem because the lender won’t fund more than the appraised value. You have options:
- Request a reconsideration of value. Federal guidance now requires lenders to disclose your right to challenge an appraisal. You can submit one reconsideration request per appraisal, with up to five comparable sales the appraiser may not have considered and an explanation of any errors or unsupported conclusions.
- Renegotiate the price. If your contract has an appraisal contingency, you can ask the seller to drop the price to the appraised value or split the difference.
- Cover the gap in cash. You can bring additional money to closing. Some lenders will allow a reduced down payment percentage to help offset the shortfall, though this usually triggers private mortgage insurance.
- Order a second appraisal. If you believe the first was genuinely flawed, a new appraisal from a different appraiser may land differently. You pay for it.
Federal regulators have been clear that challenging an appraisal is not the same as pressuring the appraiser. The Truth in Lending Act prohibits coercion or bribery that could compromise an appraiser’s independence, but asking the appraiser to consider additional comparable sales or correct factual errors is permitted.7Regulations.gov. Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations
Appraisal Contingencies
An appraisal contingency in your purchase agreement makes the sale conditional on the home appraising at or above the purchase price. If it falls short, you can walk away with your earnest money. Without that contingency, backing out over a low appraisal usually means forfeiting the deposit.
In competitive markets, some buyers waive the contingency to strengthen their offer. If the appraisal then comes in low, you either cover the gap, talk the seller down, or lose the deposit. An appraisal gap coverage clause (a commitment to pay up to a specific amount above the appraised value out of pocket) sits between full waiver and full protection.
If You Think the Appraisal Was Biased
Research has documented racial disparities in home valuations, with homes in majority-Black and majority-Hispanic neighborhoods frequently appraised below market value. The federal PAVE Task Force launched in 2021 to study the problem and push reforms.8U.S. Department of Housing and Urban Development. Action Plan to Advance Property Appraisal and Valuation Equity
Two federal laws apply directly. The Fair Housing Act prohibits discrimination in appraisals based on race, color, religion, and national origin. The Equal Credit Opportunity Act adds sex, marital status, age, and public assistance income to that list for lending decisions. If you believe your home was undervalued because of a protected characteristic, you can file a complaint with HUD’s Office of Fair Housing and Equal Opportunity within one year of the alleged discrimination, online, by phone, by email, or by mail.9U.S. Department of Housing and Urban Development. Learn About FHEO’s Process to Report and Investigate Housing Discrimination
A reconsideration of value request with specific comparable sales and factual corrections is often the first practical step; a HUD complaint addresses the discrimination itself.