Home appraisals play a critical role in the process of buying, selling, or refinancing a home. If you are a homeowner, you are sure to come across it someday. Maybe you are already in a situation where you need an appraisal, and that’s why you are reading this blog.
If so, you may be wondering how appraisers actually determine your home’s value. That’s exactly what we will explore in this blog. To get you the most accurate information, we consulted a home appraisal company in Chicago to learn about how they determine a home’s value. They have been appraising homes for over a decade, so we will for sure get some valuable insights. So, stay tuned to get some behind-the-scenes knowledge about home appraisals.
What is a Home Appraisal?
A home appraisal is an unbiased, professional assessment of a house’s current market value. It is conducted by a licensed home appraiser. Usually, lenders require appraisals to ensure the home is worth the loan amount, and buyers and sellers use them to negotiate. Home appraisals are also used to remove PMI from a mortgage if the homeowner has done some major upgrades to the home after purchasing.
Key Factors That Influence Your Home’s Appraised Value
The following are the key factors that home appraisers use to determine a house’s value:
1. Comparable Sales
This is the most influential factor in an appraisal. Appraisers look at the recent (past couple of months) sale prices of similar homes in your area. Appraisers generally look for homes with:
- Similar square footage
- The same number of bedrooms/bathrooms
- Comparable lot size
- Nearby location (ideally within a half-mile)
In cases where there aren’t any exact match properties, appraisers will adjust the value up or down based on differences. For example, a home with a finished basement will get a higher value, and a house with old roofing will be adjusted downward, etc.
If the sale prices in your area have been rising for the past couple of months, then your appraised value might come higher than it previously did, even if you didn’t make any upgrades. This is especially useful if you are trying to get rid of a PMI.
2. Property Size & Layout
Another influential factor in home appraisals is the square footage, with larger homes being appraised for higher values. Additionally, a functional layout will also matter. Open floor plans often tend to add value to an appraisal, while awkward designs may hurt it.
The number of bedrooms and bathrooms also directly impacts the value. The more rooms you have, the higher your appraisal value will be.
3. Location & Neighborhood
The location of your home is also a critical factor that can increase or decrease your home’s value. Appraisers take note of things like school district quality, proximity to amenities (parks, shopping, public transportation), etc.
Neighborhoods with a bad reputation or high crime rates will bring your appraisal value down. On the other hand, if there are future development plans in your area, like new highways or commercial zones, it will bring up your appraisal value.
4. Recent Upgrades and Renovations
If your home got some major upgrades recently, they will increase your home’s appraisal value. Examples of major upgrades include: Roof replacement, kitchen & bathroom remodels, energy-efficient windows/doors, added square footage, hardwood flooring, etc.
5. Market Trends and Conditions
The current state of the real estate market will naturally influence your appraisal value. In a seller’s market, appraisal prices will tend to be higher and vice versa.
Appraisers also look at the local economy. For example, job growth may increase home prices while recessions may lower them.
6. Age & Condition of the Home
Things like the structural integrity of your home and interior conditions also play a key role in an appraisal. Appraisals may assess the foundation, roof, and walls of your home to determine its structural integrity. Meanwhile, flooring, paint, and fixtures will determine the interior condition.
Mechanical systems like HVAC, plumbing, and electrical also matter.
Common Appraisal Myths Debunked
Myth: “Zillow’s Zestimate is just as accurate.”
Reality: Zestimates are algorithm-based and often differ from professional appraisals.
Myth: “Appraisers work for the lender/buyer/seller.”
Reality: They’re neutral third parties bound by USPAP guidelines.
Myth: “A Home’s Listing Price Is the Same as Its Appraised Value.”
Reality: Listing prices are set by sellers (sometimes emotionally), while appraisals are based on cold, hard data.
Myth: “An Appraisal Is the Same as a Home Inspection.”
Reality: Appraisers evaluate value, while inspectors assess safety and condition (e.g., mold, wiring, foundation).
Conclusion
A home appraisal isn’t just a formality – it’s a critical step that can make or break your real estate transaction. Understanding how home appraisers determine your home’s value will help you prepare better, avoid surprises, and maximize your house’s worth.
We hope you found some value in this blog and that we were able to clearly explain how home appraisers value homes.
