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    The Four Most Important Factors In A Home Appraisal

    The Four Most Important Factors In A Home Appraisal

    What is a Home Appraisal?

    If you are getting a loan on the home you are trying to buy, the bank will require an appraisal to protect their interests. If you walk away from this home, will they be able to get their money back in a foreclosure sale?

    The bank will send a certified appraiser who will first study the subject house and then compare it to other, recent and nearby homes that have sold.  The goal is to find a home sale (comparable) that is recent and nearly identical.

    Four Most Important Appraisal Criteria

    Unless you live in a newer tract home development your home is not identical to the last sale in your neighborhood. This means an appraiser picks “the best” comparable sales based on a set of criteria and then makes adjustments.


    The first rule in real estate is location, location, location – it makes sense that a real estate appraisal is based on the most recent sales with as similar of a location as possible.

    An appraiser wants a recent sale within a 1/2 mile, within the same neighborhood and with similar location amenities- view, quiet, privacy, cul de sac, etc.

    Date of Sale

    A real estate appraiser is looking for the most recent comparable sales as possible. The priority is sales that happened within 90 days of the appraisal, but no more than six months.

    Homes that sold a year or two ago are no longer useful as a comparison.

    Size of Home and Lot

    J.Q. Public loves to use “price per square foot” as a metric for assessing value. It might come as a surprise, then, that residential real estate appraisers never use that as a way of appraising a home.

    They compare the room count- they want a similar bedroom and bathroom count as well as similar additional rooms like a family room or formal dining room. A bigger home with the same room count is worth more, but there isn’t a dollar value assigned to each square foot.

    The same is true for lot size. An appraisal is based on the usefulness of the lot rather than the raw square foot of the lot. A large lot with very little flat and usable land might be appraised lower than a smaller lot with a lot of usable land.

    Condition and Amenities

    The last big criteria bucket for real estate appraisal is the overall condition and amenities of a home.

    Condition relates to factors like the age of the structure or recent remodeling or mechanical system upgrades.

    Amenities relate to major features like pools, sports courts, ADUs, additional rooms, outbuildings or lot improvements.

    Home Appraisal Adjustments Are Subjective

    Once a real estate appraiser selects their comparable homes sales they must complete a side-by-side comparison to the subject home and assign value adjustments for each criteria difference.

    There is no scientific formula for appraising your home. The home appraiser has guidelines and rules, but at the end of the day, an appraiser often must use their experience and judgment.

    This means that on one appraisal there might be an adjustment of -$10,000 for a lower bedroom count and another appraisal might adjust by -$8,000.

    Best Real Estate Appraisal Tips For Homesellers

    Know your comparable sales and understand how an appraiser will value your house before going on the market. TIP: An experienced broker (like me) will have an up-to-the-moment sense of how real estate appraisers are adjusting in the current market. An inexperienced agent or an agent who sells few homes in your local area may not have an accurate sense.

    Do not pay for an independent appraisal because it will be wasted. Your buyer’s lender will control the appraisal process during the sale and ignore any report you might have.

    Negotiate the home appraisal when you get an offer.The best time to handle potential appraisal problems is during contract negotiation.  Once you get into escrow, people establish “positions” and it is much harder to get people to accept a different price.

    An experienced listing agent (yes- like DIGGS!) can innoculate you from the risk of losing a buyer or losing a lot of money due to a low appraisal. A less experienced (or discount agent) will leave the appraisal entirely to chance, exposing you to risk, potential loss of money, and a lot of stress.

    Maximize the home appraisal appointment.On the home appraisal day, prepare your home for the showing of its life – lights on, music soft, candles lit.

    I know how to navigate a real estate appraisal appointment. I control everything from the way the appraiser is greeted to the information and documentation they receive.

    Would you be surprised to know that many agents (especially the discount agents) do not even meet the real estate appraiser?

    What Happens If The Appraisal Is Low?

    Here are your options:

    1. Ask for another appraisal or challenge the existing one
    2. Seller reduces the sales price
    3. Buyer comes up with more cash, if the lender requires it.
    4. A combination of 1 and 2
    5. The buyer does not remove the appraisal contingency and everyone walks away from the deal

    Getting Your Home Ready For Sale?

    Be sure to read our 30 Day Guide To Prepare Your Home For Sale

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