In recent years the number of all-cash home buyers has been steadily declining, with only 16% of homes purchased with cash in June of 2019. That means almost everyone is borrowing money to buy a house in the form of a mortgage.

With low mortgage rates and a buyer-friendly market, it's no wonder more people are looking to lenders rather than shelling out cash out of pocket.

But the mortgaging process can be tedious and anxiety-inducing. An important factor in your mortgage moving forward is the property's value determined by the home appraisal.

So what do home appraisers look for, and what does an appraiser do? Keep reading as we explore everything you need to know about home appraisals.

What Is a Home Appraisal?

If you're purchasing a house with a mortgage or refinancing your home, the lender will most likely require a home appraisal. While working with lenders can be nerve-wracking and feel never-ending, a house appraisal protects both the buyer and the lender.

Lenders want to make sure that the property you're buying is worth as much as you're asking them to lend you. In the worst-case scenario that you default on the mortgage and your house is foreclosed, the lender wants to make sure selling the house will recoup their losses.

This is why lenders require an objective third party who is qualified and licensed to appraise houses to step in and determine how much a property is worth.

Home appraisals are valuable to buying because it ensures that they aren't borrowing more money for the house than it's worth. If an appraisal comes back low, the buyer has an opportunity to renegotiate the deal or back out entirely.

But what does an appraiser do? The appraiser will visit a property and look at a number of different aspects of the neighborhood, lot, and home. Let's take a look at the specific things an appraiser will look for to determine your home value.

What Do Home Appraisers Look For?

As a part of the mortgage or refinancing process, a home appraiser will inevitably be walking around the property making you nervous. But don't lose too much sleep over it. Only 8% of the time do house appraisals come back undervalue.

It can also help put your mind at ease to know the answer to the question, what do appraisers look for? Let's dive in.

Exterior Considerations

When a professional appraiser comes to conduct a house appraisal, expect them to pay a lot of attention to the construction of the home. Any damage or potential future issues with the roof or the foundation are critical factors in determining the value of the home.

Other important factors that the appraiser will consider regarding the exterior of your home are the size of the lot, the condition of the siding, guttering, the overall quality of the construction, the observable condition, and the condition of the driveway.

Another thing the appraiser will look at is the neighborhood as a whole. Whether the house is the nicest house on a rundown block or the most rundown house on a nice block will factor into the final valuation of the home.

Interior Considerations

Inside the house, the appraiser will largely be looking at how well the space is used (also known as the functional layout,) the total square footage, and the number of bedrooms and bathrooms.

They'll also take note of the number of quality appliances as well as the condition of the windows, doors, flooring, and walls. The state of the electrical, heating, and plumbing systems is also an important factor in determining the home's value.

Appraisers will also check into health and safety issues and potential hazards, for example, the condition of handrails, fire escapes, and porch structures.

Home Improvements

Both lenders and buyers love well-done renovations and newer appliances. These will factor positively in a home appraisal. For example, if the kitchen or bathroom's been updated, the HVAC system's been upgraded, or a new flooring's been installed, all of these will be taken into consideration by the home appraiser.

If a major renovation has been done, the appraiser will check to make sure everything is up to code and structurally sound.

Additions and Extras

Certain extras like well-maintained pools, insulated windows, security systems, garages, and fireplaces can add to the value of your home. This is only true if the house is in a location where buyers find these extras appealing and are willing to pay more for them.

How Do Appraisers Calculate a Home's Value?

Once a professional appraiser has done their on-site inspection of the property, they will then use what is called the comparable sales price approach to determine the value of the home.

The appraiser will look at homes in the area or neighborhood of a similar age, size, condition, and construction that have sold in the last six months. By taking the prices those similar homes sold for, and then adding or subtracting value based on the qualities specific to the home they're appraising, they will come up with the home's value.

This means that the final valuation of the home is both based on the condition and qualities of the home as well as the trends and state of the current real estate market in your area.

Don't Lose Sleep Over Your Upcoming Home Appraisal

You can now rest easy knowing the answer to the question: what do home appraisers look for? For whatever reason, it's surprisingly uncommon for home appraisals to come back low. And, even if they do, it tends to lead to renegotiation in favor of the buyer. So don't fret!

Did you find this article on house appraisal helpful? Don't forget to check out the rest of our blog for more great articles on everything you need to know about real estate!