How Long Does An Appraisal Take? What You Should Know

A residential appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth, in the current real estate market. Buyers typically need a mortgage loan to afford a home. As a result, a mortgage lender will order an appraisal to ensure that they are able to safely lend the money required by the buyer in order to pay for the property. 

The end result of the appraisal process is to ultimately receive a report detailing the steps taken to arrive at a final home value.

How long does the home appraisal take?

An appraisal generally takes anywhere from one hour to one week to complete from the time it is ordered by the loan officer or mortgage company. The length of time varies depending on the approach that the appraiser takes. Appraisers use three different methods to appraise property, sometimes using a combination of all three:

• Cost Approach: Indicates the price a buyer should pay for a piece of real estate based on what it would cost to build something equivalent in today’s market. The market price is equal to the cost of land, plus the cost to construct the building, minus depreciation.
• Income Approach: This looks at how much the property rented for and how much income it can generate. From here, a value of the property is taken.
• Sales Comparison Approach: Comparable sales in the neighborhood, this is the most common approach used to conduct an appraisal.

What happens during the appraisal?

There are three main components of home appraisal. 

Physical inspection

The appraiser examines the property to determine if the condition is average, good, fair, or poor. With that, most appraisers use a standardized form to complete the appraisal.

Exterior Factors:

• Structure – An appraiser looks for any deficiencies that affect the structural integrity of the house and the livability.
• Construction quality – Materials used on the home can affect the quality of the construction. For example, a house made of brick vs. stucco.
• Roof and foundation integrity – The age or material of the roof affects the value. With that, some shingles last longer than other ones.
• Neighborhood – If the property is near good schools, parks, recreation, low crime, etc, then those factors will increase the property value.

Internal Factors:

• Square footage – The market largely drives the price per square foot of a home, so this is be an important factor for determining the appraisal price.
• Functional layout – An open floor plan vs a closed floor plan is an example of this.
• Number of rooms – The size of bedrooms, bathrooms, and kitchens is examined, and how many.
• Interior condition – Is there mold, paint issues, etc. or is the home in perfect condition? 
• Structural integrity – Appraiser’s look for things like crooked floors, leaking pipes, etc to make sure the structural integrity supports the home’s value.

Comparable sales (comps)

The appraiser looks at comparable properties to determine a fair market value based on the current housing market. Below are several factors that go into looking at comparable sales.

Recent Time Frame of Sale: Appraisers generally look at the last 3-6 months to find comparable sales.

Proximity of Comparable Properties: An appraiser researches similar properties within a certain radius of the one being appraised. Ideally, one-quarter to one-half mile to the property in question. As a result, the closer the comparable homes are to the property being appraised, the better.

Square Footage is Similar: The square footage of the homes is compared, this is dependent on the size. Ideally, the compared home needs to be within 10% of your subject property’s square footage. 

Similar Construction Style and Age: The appraisal value of a home varies based on character and overall appeal of the home. For example, a tile roof (50-year lifespan) versus a standard shingled roof (25-year lifespan). Another example is a home built in 1890,next to a home built in the late 2000s. Comparing these two homes wouldn’t make sense because there are so many differences in homes during a time span that large.

Lot Size: In some developments, lot sizes may vary. For example, the side of the lot or the backyard is small, and with or without grass, vegetation, etc. 

Home Condition: It’s often hard to determine the condition of a comparable property. For example, a foreclosed home, which is missing appliances, toilet, etc, is worth a lot less than a move-in ready home with new appliances, upgrades, etc. If a home is being compared in a subdivision, with an HOA and strictly enforced guidelines, then it might be easier to find closer models to use as comparable sales.

Things to note with comparable sales

Just because one home is 1,000 square feet doesn’t mean doubling it will accomplish determining the value of a 2,000 square foot home. Usually, the per square foot cost of a larger home is higher than smaller homes.

Additionally, lot size is typically calculated from the square footage divided by 43,560 square feet (which is one acre). A quarter acre is about 10,890 square feet. Comparable sales shouldn’t look at lot sizes that are very different in size.

Evaluation Of Data

After all steps of an appraisal are completed, a final report of value is generated for the buyer and seller to look at. Ultimately, this report provides a complete property analysis, outlining how the appraiser calculated the home’s worth.

The final report generally covers the following items:

• First, size and condition of the house because the going price per square foot will affect the price as long as the conditions are satisfactory.
• Then, maps and photographs of various items around the property
• Comments about serious structural problems (cracked foundations, wet basements, windows that need replacement and roofing)
• Permanent fixtures (lights, ceiling fans and plumbing)
• Details about updated kitchens, bathrooms or new flooring
• Comments about the surrounding area, including positive and negative notes about the neighborhood
• Lastly, a detailed market analysis, including recent sales of comparable homes