Appraisal 101

You’ve decided to build with us and and now it’s time to work on your loan and get everything in order before the house is all yours. One of the first items on your closing checklist will be the home appraisal. So, what exactly is involved in appraising houses?


Appraising a house is essentially a value assessment of the home and property. It is not the same thing as a tax assessed value, which determines your property taxes. It is also not the same as fair market value, which is the price a buyer is willing to pay for your home on the open market.

A home appraisal conducted by certified third party home appraisers and is used to determine whether the home is priced appropriately. Mortgage lenders have a system for ordering home appraisals and will order it on your behalf (you don’t have to call home appraisers to try and set one up).

What is an Appraisal?

During a home appraisal, the appraiser conducts a complete visual inspection of the interior and exterior of the home (not the same as a home inspection). He or she factors in a variety of things, including the home’s floor plan functionality, condition, location, school district, fixtures, lot size, and more. An upward adjustment is generally made if the home has special features such as a deck, a view, or a large yard. The appraiser will also compare the appraise house to several similar homes that were sold within the last six months in the area. By doing these kinds of comparisons and adjustments, the real estate appraiser determines the value of your home. If your home is yet to be built, the work will be done based on floorplans and architectural drawings, surveys, and general information from other homes we have built.

The final report of any housing appraisals, must include a street map showing the property and the ones’ compared, photographs of the interior and exterior, an explanation on how the square footage was calculated, info regarded the method used in the home inspection process (again, not to be confused with the general homes inspection), market sales data, public land records, and more.

The home appraisal cost may be charged up front, so talk to your lender and know if it is before they order one. Sometimes the appraisal fee is charged to the buyer at closing as part of their closing costs.

What Happens Once You Receive Your Appraisal Report?

There are two basic outcomes to the home appraisal process. You’ll hear the phrase “the house appraised” meaning the fair market value of the home determined during the home appraisal process is equal to or grater than the purchase price. If the home is under contract for more than what the appraised value is, your mortgage lender and real estate agent will need to discuss a plan to move forward or terminate as the lender won’t lend based on a sales price that is greater than the appraisal report shows.

After it is complete, the lender uses the information found to ensure that the property is worth the amount they are investing. This is a safeguard for the lender as the home acts as collateral for the mortgage. If the buyer defaults on the mortgage and goes into foreclosure, the lender generally sells the home to recover the money borrowed. So in order to protect themselves, they want to be sure that they’re not loaning you more than the collateral is worth.

Your lender can tell you a bit more about the home buying process and how the appraisal fits into the big picture. They will give you updates on when the appraisal is ordered and when the report is expected back from the appraiser.

image courtesy of tony.mariotti

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