The Appraisal Process: How to Buy a House 101

Aalto Insights Team
Jan 9, 2023

Buying a house is one of the biggest financial decisions you will ever make. If you're doing it without a realtor, you'll need to be well-informed about what it entails. One of the most crucial steps is getting an appraisal after you’re in contract on a house

An appraisal gives you an educated estimate of how much the property you just purchased is worth in today’s housing market. In this post, we’ll explore everything you need to know about your soon-to-be home appraisal, including why you need an appraisal, how it works, and how to prepare for one.

Let’s get started.

What Is a Home Appraisal and Why Do You Need One?

During the appraisal, a licensed or certified appraiser conducts a thorough home inspection to determine a home’s value.

Whether you’re starting the home-buying process or a homeowner going the direct listing route, appraisals are almost always required when you’re making a real estate transaction. It helps homeowners narrow in on an asking price and keeps lenders from loaning borrowers more money than what the home is worth.

How Does the Home Appraisal Process Work?

Here’s what you should expect during a home appraisal:

  1. Your lender orders an appraisal: When buying a home, your mortgage lender will order an appraisal once your offer is accepted and you’ve signed the purchase agreement.
  2. The home gets assessed: Next, an appraiser will conduct an on-site or remote walk-through of the property to determine its value. The appraisal can take anywhere from 15 minutes to several hours, depending on the size of the property.
  3. An appraiser conducts a comparative analysis: The appraiser then looks up comparable homes and their sales prices, and reviews other housing market factors that may impact a home’s value.
  4. The appraiser completes their report: Finally, the appraiser then compiles all the information they gathered into a report for your lender. You should also ask for a free copy of their report. Read it carefully, and inform your lender of anything you believe is inaccurate.

How Long Does a Home Appraisal Take?

Typically, an appraisal takes between 7-10 days from the on-site or virtual walk-through to when the report is filed. If the property is larger or has unusual features, or if the appraiser is backlogged, the process may take a little longer.

How Much Do Home Appraisals Cost?

Typically, a home appraisal costs between $300-$450 for a single-family home, and it’s normally included in your closing costs. If the appraisal is for a multi-family home or a large property with unusual features, your home appraisal could cost $600 or more.

What Do Home Appraisers Look For?

How to buy a house without a realtor: Midcentury living room

Home appraisers are very thorough in their inspections. To accurately determine a home’s value, they analyze many factors, including:

  • If it’s a new home or an older property
  • Comparable home sale trends in the neighborhood
  • Condition of the neighborhood
  • Location, location, location
  • Home size and lot type
  • Home layout
  • Structural integrity of the home’s foundation, roof, etc.
  • Potential hazards (prone to floods, fires, etc.)
  • Condition of home appliances
  • Special features, like a deck or swimming pool

What’s the Difference Between a Home Appraiser and a Home Inspector?

While the two roles have some overlap, home appraisers and home inspectors serve distinct purposes. Home appraisers determine home values, while home inspectors focus on your home’s condition.

Home inspectors are more interested in looking for things like rotted wood and electrical wiring. They also identify hazards, like lead paint, asbestos, and ceiling cracks.

While appraisals are often mandatory, home inspections are optional. However, they’re still recommended for all buyers, as you never know what issues could become major expenses down the line.

What Do You Do If Your Appraisal Comes In Too High or Too Low?

Appraisals are educated estimations of a home’s value by an expert in the field, but they’re not always perfect. If an appraisal comes in higher than predicted, it’s to the buyer’s benefit, because the difference between the appraised value and the home purchase price is considered additional home equity. For example, if you agree to buy a home for $800,000, but it’s appraised at $825,000, your implied additional equity is $25,000. 

On the other hand, if an appraisal is lower than predicted, it can disrupt the closing of the sale. Request to see the appraisal report and check for errors. Aalto provides an on-demand expert agent help to guide you through these parts of the process, but if you are buying entirely alone, then hiring a real estate attorney could be beneficial. Expert agents and experienced real estate attorneys know how to identify potential reasons for the discrepancies that you may miss on your own.

You should include an appraisal contingency in your purchase agreement, in the event that the appraisal comes in low. If you have one, and the home’s appraised value is lower than the amount you agree to pay in your purchase contract, you can get out of the deal and get a refund on your earnest money deposit.

If you still want to purchase the property, you can also make a counteroffer that’s closer to the appraised value. For example, if the house is appraised for $750,000, but your offer is $800,000, and you have a sales contingency, you can try to convince the homeowner to sell for $750,000. If you’re making a 20% down payment, you’ll save $10,000 — and monthly payments will be less.

How to Prepare for a Home Appraisal

For homebuyers, appraisals can be stressful to think about. Here’s how to prepare to them:

  • Include an appraisal contingency: Many home purchase agreements already include these, but you should double-check just in case. Before submitting your offer, have a clear understanding of your options if the appraisal comes in too low.
  • Accept your lack of control: Homebuyers can’t influence an appraisal’s results. However, if you have an appraisal contingency, you can renegotiate or walk away from a deal if the appraisal is too low.
  • Don’t give in to pressure: Seller’s markets can push buyers to make higher offers when they find homes they like. While competitive markets can spur bidding wars, don’t go for broke.

How to Buy a House Without a Realtor

Family with two kids unloads moving truck

Whether you're a first-time homebuyer or experienced real estate mogul, you don’t need a traditional real estate agent to purchase a home. Traditional buyer’s agent and seller’s agent fees eat up around 6% of a home’s total value — and those numbers add up, especially in California’s housing market.

Between appraisals, pre-approval letters, title searches, and closing documents, the traditional real estate process is purposely daunting by design. However, understanding how to buy a house without a realtor isn’t as complicated as you’re led to believe.

Much like getting your home appraised, many aspects surrounding how to buy or sell your house are easy to comprehend once you learn about them. By educating yourself about your options for the real estate process, you can save yourself tens of thousands of dollars on fees by using direct platforms like Aalto to find and purchase a home. 

Aalto is on a mission to shift the balance of power in residential real estate away from industry insiders and toward consumers because we believe everyone should be able to take their move into their own hands.

Aalto is the modern real estate platform that gives you the tools, access to homes, and insider information normally reserved just for agents. When you’re buying, this means more inventory and the full story on any home. When selling, this means you can price your home like a pro and gauge real-time market demand to help you sell with confidence. All while saving you money with lower fees and cash-back offers.

Are you ready to take control of your home-buying process? Get started on Aalto today!

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