How Long Does an Appraisal Take and What Should You Expect?
Whether you’re buying or selling a home, you will need an appraisal. An appraisal provides you with a professionally calculated estimate of the fair market value of the home based on several factors, including comparable sales, the condition of the home, and the current market conditions.
In this article, we’ll discuss why you need an appraisal, how the process works, how to avoid potential delays, and how to protect yourself if the appraisal comes in high or low.
How Long Does an Appraisal Take?
The home appraisal process usually takes 7-10 days from the on-site or virtual walkthrough date to receiving the appraisal report.
Why You Need a Home Appraisal
Appraisals are almost always required when you’re making a real estate transaction. They determine a home’s value, informing homeowners of an accurate asking price while letting homebuyers narrow in on what they should offer. Appraisals can also keep mortgage lenders from lending borrowers more than the actual value of the home.
How the Home Appraisal Process Works
Here’s what’s typically included in the home appraisal process and what you can do to help make it run smoothly.
1. The Request
As a buyer, your mortgage lender will request an appraisal after the seller has accepted your offer and you’ve signed a purchase agreement. The sooner that agreement gets signed, the faster you can get started on and complete the appraisal process.
2. The Assessment
During the assessment, a licensed appraiser conducts a physical inspection of your property. The assessment is comparable to a home inspection, except your appraiser is determining the value of a home while a home inspector focuses on its overall condition. You can also request a virtual walk-through for the assessment, but we don’t typically recommend it as the results can be inaccurate.
During the inspection, the appraiser usually looks at numerous things, including:
- Whether it’s a new home or an older property
- The home’s layout and structural integrity
- Home improvements and renovations that were made
- Number of bedrooms
- Condition of the appliances
- Potential hazards
- Special features or amenities
A residential appraisal can take as little as 15 minutes to as long as several hours, depending on the house’s square footage, if it’s a single-family or multi-family home, and any unique features that may require additional attention.
To streamline this process, schedule a time and date to meet with your real estate appraiser and be sure to clean the home beforehand. The appraiser will have an easier time determining accurate valuation if they can access everything they need to evaluate without clutter distracting them.
3. The Comparable Homes
Next, the appraiser will typically research the recent sales prices of comparable properties or “comps,” the condition of other homes in the neighborhood and the area as a whole, the house’s amenities and upgrades, and the current state of the local housing market.
4. The Report
After conducting a walkthrough of your house and comparing it to similar homes in the neighborhood, the appraiser then determines the appraised value of your home and compiles a report for your mortgage lender. Make sure to request a free copy of this report to read over when it’s complete. Their findings could impact your home’s appraised value if they are inaccurate.
What Can Delay an Appraisal?
These days, it’s not uncommon for appraisals to hold up the closing process, even if you do your best to streamline the process. Here are a couple reasons why there might be delays:
Since the pandemic, multiple industries are experiencing labor shortages, including real estate. Loan officers, mortgage lenders, and qualified home appraisers have roughly the same amount of work to do as before, but there are fewer of them to do it.
Because of this, the home appraisal process is taking longer than usual or in pre-pandemic days at each and every stage:
- Submitting a request: Once a purchase agreement is signed, your mortgage lender schedules the appraisal appointment. However, if this lender is buried under a mountain of paperwork and other requests, the scheduling of this appointment may not happen right away.
- Scheduling an appraisal: Like your lender, your appraiser could be playing catch-up with their work. When your lender finally contacts them to schedule an appraisal the home appraiser may already be booked for weeks or longer, so the appointment will be further out.
- Research and reporting: Some appraisers work in teams or have assistants that help conduct comps research and help them write appraisal reports. If they’re experiencing staff shortages, there are fewer people to do this work, so again the lead time might be longer.
Lack of Information
With many appraisers working on tight schedules, it can be hard for them to leave a house with all the information they need.
To help avoid this scenario, a homeseller can save them time by providing the following:
- The home’s original blueprints
- A full list of features that could positively or negatively impact the home’s value
- A detailed list of any construction or cosmetic upgrades made to the home in the last decade — be sure to include as much information as possible about each of these renovations
An Appraisal Gap
Usually, the appraisal is aligned with the agreed-upon purchase price, or the difference isn’t significant enough to matter. However, a low appraisal can interrupt the entire transaction.
A low appraisal creates a gap, which can make lenders apprehensive about giving the buyer a loan. A low appraisal occurs when your lender’s appraiser reports that the home is worth less than what you agreed to pay in the purchase agreement.
For example, if you agree to pay $900k for a home, but the appraised value comes in at $850k, your appraisal gap is $50k.
Appraisal gaps are typically caused by:
- Competitive real estate market conditions
- The differential between your agreed-upon purchase price and recent comparable sales in the neighborhood
- The poor condition of a home or repairs required for it
- Differing expert opinions regarding the home’s value or true worth
When an appraisal gap occurs, the buyer has several options — assuming they have an appraisal contingency (more on that later), buyers can:
- Pay the difference: If your mortgage lender informs you that they’ll only lend you $850k and you need $900k, you’re short $50k. One way to resolve an appraisal gap is to pay the extra $50k. It’s not an ideal solution, but it’s an available option.
- Negotiate with the seller: Sometimes the seller is just as motivated to sell as you are to buy. If they are open to negotiation, you can ask if they’re willing to lower the purchase price. You can also ask the seller if they’re willing to meet you in the middle. For example, if they drop the purchase price to $875k and you put up an extra $25k, that will also close the gap. A third option is to suggest seller concessions. If the seller agrees to pay for the costs associated with the closing process, that could save you tens of thousands, which you could use to close the appraisal gap.
- Request a second opinion: If you can prove to your lender that the first appraisal is inaccurate, you can request a new one that could potentially come in closer to the purchase price.
- Walk away: If none of the above options work, you might have to walk away from your dream home. It’s not ideal, but neither is fronting an extra $50k you weren’t planning to spend.
Sometimes, the threat of walking can also bring the seller back to the negotiating table. However, this shouldn’t be your plan when you decide to walk.
How Much Does a Home Appraisal Cost?
Residential appraisals usually cost between $300-$450 for a single-family home, and it’s typically included in your closing costs.
If the appraisal is for a multi-family home or a larger property, the appraisal may cost you $600 or more.
Why You Should Have an Appraisal Contingency
An appraisal contingency is what gives you all of the above options. This contingency provides you with a legal option to withdraw from a real estate deal. You can still walk away without one, but it’ll probably cost you your earnest money deposit. These days, that’s about 2-3% of the home’s total value. And 2.5% of a $900k home is $22,500. That’s a lot of money to walk away from with nothing to show for it.
Find Your Dream Home With Aalto
While you almost always need a home appraisal to get a loan, you don’t always need a traditional real estate agent to complete a transaction. Aalto is a self-service real estate platform that gives you the tools you need to buy or sell your home — no traditional agent required. We’ll also handle negotiations and the paperwork on your behalf to relieve the stress of the appraisal and homebuying processes.
Are you ready to see how easy it is to buy or sell your home on Aalto? Get started today!
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.