What do home appraisals take into account?

When you want to buy a home and apply for a mortgage, the amount of money you can borrow depends on the home appraisal, which is required by the lender. The appraisal determines the property value, based on specific criteria, and as evaluated by a licensed and certified appraiser.

An appraiser bases the value of a home in one of two methods. If it is a new property, the appraiser uses the cost approach. This means that the appraisal is based on how much it would cost to rebuild the same house on the same property. Land value and depreciation are factors that the appraiser also takes into account in determining the property value. The other method is called the sales comparison approach. The property value of the house being appraised is determined as it compares to other similar houses that have been sold in the same area. Important factors that the appraisal is based on include the age of the house, its style, the surrounding property, and the size of the lot and the house. If there are any special features or permanent fixtures in the house, like a fireplace, they are also considered elements that affect the property's total value. Any structural problems, such as cracks in the foundations, are also included in the appraisal report.


Along with the size and condition of the house, there are other things that the appraiser takes into account, such as market trends that may affect the value of the property and any notes on the surrounding area, such as whether it is rural or developed. Even if the appraisal report determines that the value of the house is lower than the asking price, the lender will only approve a mortgage based on the property value as determined by the appraiser.