An appraisal is an opinion of the market value of a home, and it’s performed by a third-party professional with state-issued appraiser credentials.
The main purpose of an appraisal is to help the lender evaluate the collateral for your loan, which is your home. As a homebuyer, you can also use the appraisal report to help decide whether the purchase price you’ve agreed to with the seller is acceptable.
A home appraisal report provides useful information about the property, and the appraiser takes into consideration several items when determining a home’s value, including:
The appraiser provides a report to the lender, and in most cases the lender is required to provide a copy to you. The appraisal report will share the appraiser’s analysis that supports the valuation of the home, and it will include photos and descriptions of comparable home sales.
It can take roughly one to two weeks, or even longer in areas with high appraisal activity, from the time of the initial inspection of the property until you receive the final report.
Your lender is responsible for ordering the appraisal, but you will likely be required to reimburse the lender for the cost, typically as part of your closing costs. Appraisal costs vary greatly by geographic region, but the median cost is $450 to $700.
If you’re looking to save on closing costs and reduce the time to close on your home, you may be able to trade the in-person appraisal for an automated home assessment.
The alternative to a traditional appraisal is called an automated collateral evaluation (ACE) appraisal waiver. It uses data, analytics and historical information about the property to estimate its value, rather than relying on a standard appraisal.
To see if you qualify for an automated assessment, talk with your loan officer.
If the property is appraised at a value that falls below what you’ve offered to pay for the home, you have options:
To learn more about home appraisals and inspections, visit My Home by Freddie Mac®.