The Basics of Appraisals


What are appraisals, and how do they work?

An appraisal is an independent, professional opinion of value. An appraisal helps establish a property’s market value – the likely sales price it would bring if offered in an open and competitive real estate market.There are three main parts to a home appraisal:
  • Inspection – A licensed appraiser comes to the property and inspects its size, condition, function and quality
  • Comparables – The appraiser researches similar homes in your area and compares recent sales to determine fair market value
  • Final Appraisal Report – The appraiser compiles all of the data to issue a final appraisal report

Why do I need an appraisal to get a home loan?

Appraisals protect both you and your lender from purchasing an overpriced home or refinancing for more than your home is worth.


Does Divito Lending conduct the appraisal?

No. By law, an appraisal must be done by a third party who has no interest in the outcome of the appraisal. While we place the order for the appraisal, we don’t conduct it ourselves.


How much does an appraisal cost?

Most appraisals cost between $200 and $600, but keep in mind that the cost can exceed that range.

The cost of an appraisal varies based on the type and location of the property. Your appraisal may cost more if you have a multiunit property instead of a single-family home, for example, or if you live in a remote area.


Is the cost of the appraisal covered by my deposit?

The cost of your appraisal is typically covered by your deposit, which covers fees we pay to third parties on your behalf while processing your loan.


When does my appraisal expire?

Most appraisals are valid for four months (120 days). Your appraisal must be valid through your closing date. If your appraisal expires before your loan closes, we may require you to get an updated appraisal.


Your Appraiser


How is my appraiser selected? Can I choose my own appraiser?


By law, an appraisal must be managed by a third party who has no interest in the outcome of the appraisal. The mortgage industry refers to that third party as the appraisal management company, and they alone are responsible for selecting a licensed, independent appraiser.


What are the qualifications to be an appraiser? Is my appraiser licensed in my state?


Your appraiser must be licensed or certified by a state regulatory agency that enforces the Uniform Standards of Professional Appraisal Practice, as well as state and federal regulations. Your appraiser is licensed in your state so that they are familiar with the geography and statistics of your area.


Can I contact my appraiser after the appraisal is complete?


No. By law, neither you as the client nor we as your lender can speak directly to appraisers regarding a home’s valuation assessment. If you have questions about your report, please contact your Home Loan Expert – they will assist in getting the right people involved to address your concerns with the appraisal.


Determining Your Home’s Value


How is the value of my home determined?


Your appraiser will visit your home to assess its size and condition, and then compare it to similar homes in your home’s market area to provide you and your lender with a professional opinion of your home’s fair market value. Your appraiser may adjust the value of your home based on its features and amenities – for example, having an extra-large garage or being located in a cul-de-sac can increase the value of your home.



What are adjustments? How do they affect my appraised value?


Since no two homes are exactly alike, appraisers make adjustments to fine-tune your home’s value according to comparable homes in your area. Say there’s a recently sold home a few blocks from yours with the same number of bedrooms, bathrooms and square footage, but it overlooks a golf course and has a screened-in porch. If your home doesn’t have comparable views and amenities, your appraiser will make adjustments to the price of the comparable home to come up with a value for yours.



The inspection didn’t last very long. How can the appraiser know the value of the home?


Before appraisers visit your home, they research your home’s neighborhood, age, location and type, along with recent home sales data and more. With all of this information, the appraiser only needs to assess the size, condition, function and quality of your home during the inspection.



What happens if my appraised value is lower than my loan amount?


We usually can’t finance an amount higher than the appraised value of a home. When an appraised value is lower than the agreed-upon sale price of a home, the buyer must make up the difference, or the seller must decrease the price.

If you’re refinancing, a lower-than-expected appraisal value can affect the terms and structure of your loan. You can pay the difference in your closing costs, but if the appraisal is much lower than the loan amount, this may not be an affordable option. Unfortunately, if there isn’t a loan available based on your home’s value, you may have to wait until the values in your neighborhood start to bounce back.



My house is worth half the amount of my next-door neighbor’s house. Why?


Keep in mind that a number of factors come into play when determining the value of your home, including square footage, features, location and more. Appraisers need to compare apples to apples. For example, you can’t compare a 5-bedroom, bi-level home to a small, 2-bedroom ranch, even if they are side by side. Similarly, homes of the exact same size and features in different locations will also vary in value.



I found a few websites that say my value is higher than what my home appraised for. Why?


Online estimates might not have up-to-date information, and nothing can replace a real person doing a live walk-through of your home and seeing firsthand all that it has to offer.

It’s important to know that in the post-bubble lending market, many home loan and appraisal guidelines are government regulated and much stricter. These guidelines are put in place to protect consumers from getting mortgages they can’t afford, or from getting large loans on houses that don’t have value.



How did my value change so much since I had an appraisal a few months ago?


Values can fluctuate throughout the year due to consumer demand, nearby foreclosures, short sales and more.


After Your Appraisal


What does it mean that my appraisal is contingent on repairs?


Repairs required during the appraisal process usually involve structural safety concerns, such as steps with no handrail or water intrusion through your foundation. If you’re buying a home, it’s generally the seller’s responsibility to complete the required repairs before closing. If you’re refinancing, you’re responsible for completing all the necessary repairs before you close. That’s why it’s a good idea to complete all your big home improvement projects before starting to refinance your home.


What are addendums? Why did my appraisal value change?


Addendums are changes to your appraisal report that occur during underwriting when we double-check the details of your appraisal. Usually, addendums result from us asking for clarification on the required repairs. Addendums are also made when we find small clerical errors, missing photos or incorrect adjustments. If there’s a significant change that could alter your loan, we’ll reach out to you to let you know your options.