Home Appraisals

After much time and research, you've done it - you've found your dream home. Now that your offer has been accepted and your lender has already pre-approved you, it is time for the home appraisal. But how much is the home worth? That’s the question at the heart of an appraisal. Home appraisals find out if the asking price is different than the actual value of the property. The value of the property will determine what the lender will loan you.

An appraisal is the expert opinion that defines the value of a property. But why is the lender so interested in the home appraisal, you may ask? A home appraisal protects the lender by using the home as collateral for the loan, making sure that their investment is indeed, worth the amount that they loan to a borrower. It also helps you  not only to understand what the state of the home is, but it protects you from paying too much for a home.


Your lender typically requires you to use an approved appraiser, as this creates consistent appraisals. It is usually the buyer that pays for the service as part of the closing. The cost can vary depending on several factors, including the price of the property.

There are two common methods for valuing property:

  • Sales comps: This compares the property with a few similar homes that have sold in the area. The main factors are lot size and square footage. Style and age of the house, and special features like garages and fireplaces are also considered.

  • Cost approach: The appraiser estimates the cost to replace the structure if it was destroyed. The appraiser then looks at land value and depreciation to determine the property’s worth. This method is used more for new construction homes.


Home appraisals begin with an inspection of the property. After, the appraiser looks at county records as well as reports from the local real estate listing services.

The appraiser then prepares a report that includes:

  • The reason why the property was valued a certain way
  • The size and state of the house.
  • A description of any improvements made and materials used.
  • Statements about serious problems like cracked foundations.
  • Notes about the area.
  • Market trends of the area that may affect the value.
  • Maps, photos, and sketches.

The report will be given to both the lender and the buyer. You will now have a better understanding of how much your dream home is worth. Depending on the appraisal value, the transaction can continue on its course, or the purchase price may need to be renegotiated. If the home appraises significantly under the purchase price, the buyer can cancel escrow, try to renegotiate a new purchase price, or may have to increase their down payment in order to proceed with the purchase of their dream home.


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*Logix has partnered with GreenPath Financial Wellness to give members access to additional financial wellness content, including this blog article. Views and opinions expressed in the financial wellness content are those of GreenPath and may not always represent the views and opinions of Logix Federal Credit Union. Logix Federal Credit Union is not affiliated with GreenPath, and is a separate entity. Please contact Logix at (800) 328-5328 or visit www.lfcu.com if you have any questions about this topic or would like to consider opening an account. This blog is intended for informational purposes only. Logix is Federally Insured by NCUA and is an Equal Housing Lender.

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GreenPath Financial Wellness

GreenPath Financial Wellness

Our mission is to empower people to lead financially healthy lives. We are a national nonprofit focused on financial wellness for everyone. People have turned to us for nearly 60 years as their guide through financial crises: overwhelming debt, foreclosure, bankruptcy, or credit challenges. Today, we work to strengthen financial wellness at every step of the financial journey. Every year, hundreds of thousands of people improve their financial health by working with us.