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What is a real estate appraisal?

Real estate appraisal, property valuation or land valuation is the process of developing an opinion of value for real property (usually market value). Wikipedia

Different markets, time, and technology all contribute to the dynamics of the time it takes to close a real estate transaction. Currently, low interest rates have flooded the market with buyers and homeowners refinancing their homes. This sudden increase has led to appraisers being overwhelmed with orders.  In order to address this national issue,  councils have been formed at state and national levels to discover new ways to alleviate the load and offer alternative solutions. However, there are some factors that can affect the closing time.

There are a few factors to consider in making sure your process goes efficiently as possible:

1. Choose local lenders rather than internet lenders. Local lenders  have existing relationships with appraisers, which could benefit your transaction in speed and cost. (As a seller it would be beneficial to work with a buyer who is using a local lender)

2. Address lender required repairs before scheduling an appraisal. Although appraisers are not inspectors, they will look at safety concerns on government backed loans such as USDA, FHA, or VA.  Appraisers will most often note concerns relating to  roof issues, termites, peeling paint, rotting wood, and broken window panes. If issues are cited on the appraisal report, it will be necessary for the appraiser to return to the property in order to verify the repairs before the buyer can attain their financing. 

3. Schedule appraisals as soon as possible and ensure utility services are on. The typical appraiser will measure the actual square footage of the home, take pictures of the interior/exterior, check for running water and utilities, and conduct a visual inspection of the overall premises. On a home less than 3000 sq ft., one can expect an appraiser to be on site for approximately 30 minutes. However, homes on land (or larger homes) can take longer. Although it isn’t necessary to have the home “Show ready” , remember that the appraiser is writing the valuation report for the property so, impressions do count!

4. Ensure pricing reflects current market analysis.  Appraisal jobs are so plentiful, that appraisers are able to choose the orders they feel are less complicated. Of course, sellers always have the option to feel the market out and try to get the highest price possible.  However, in this market, time is of the essence.  Over inflated selling prices can lead to disputed appraisals and unnecessary delays.

5. Who orders appraisals? Once repairs have been negotiated and settled, the buyer’s agent will notify the lender that the buyer is ready to order the appraisal. In cases where financing is involved, new legislation requires there to be distance between the lender and appraisers. In order to create this distance, The Appraisal Management Companies operate from a third-party list of appraisers. The Appraisal Management Companies will post an order for an appraisal, and appraisers may accept or decline the job.  The first party to know who has been assigned the appraisal is the listing agent, because they will schedule an appointment to view the property. At that time, the listing agent typically notifies the buyer’s agent, who then notifies the buyer.

6. When is the appraisal report received? Typically appraisal reports are not returned at the same time or day that the appointment is scheduled to view the property. Lenders will note a due date for the report to be submitted. This serves as a deadline. Most appraisers will submit the report by the deadline. However, in a few instances, they may be submitted a day or two later. 

7. Who Receives the Appraisal? The lender will send a copy of the appraisal to the buyer. The buyer is not obligated to show a copy of the appraisal report or amount with the seller, unless there are appraisal contingencies in the contract required dispute.

8. How long does it take to get an appraisal? Appraisers, as stated above, are overwhelmed with orders. The more unique the property, the more time should be expected for an assignment to be accepted. Rural properties may require more time. The shortest time for appraisal reports would be 4 days, but it can go up to 8 weeks if no appraisers will accept the order. 

9. What are my options if I don’t like the appraisal amount? This varies from transaction to transaction depending on the market, type of financing, and how the contract is written. However, there are options if you disagree with the appraisal.  First look for errors that may contribute to any discrepancies.  If errors are not detected, you may want to analyze the property it is being compared to and make sure they are in fact comparative in nature ie. age, square footage, school district, etc. Ordering an appraisal yourself is an option, but consider the fact that it will likely lengthen the closing process. It should be noted that the buyer’s lender may not accept another appraisal reportAlso, it’s important to note that FHA appraisal values stay with the home for 6 months.  First and foremost, keep an open communication with all parties involved which will allow concerns to be addressed in a timely manner. 

There is always the possibility of unavoidable delays which can affect closing, however, keep in mind these few steps of preventative measures which can create a more efficient and seamless process for everyone involved.