A home appraisal is an integral part of the home-buying process -- and it's one of the final hurdles.

Once you have found a home you love, negotiated a price and signed a contract to purchase it, your lender will arrange for the property to be appraised by a certified third party. The seller usually pays for the appraisal.

The appraisal is an educated guess of what the home is worth -- and you won't be able to borrow the money to buy the house without it.

The appraisal assures the lender that the home you're buying is worth at least the amount of money you're borrowing. (The lender doesn't want to lose money if you default on your loan and they have to sell your house to recoup the loan.)

If the home's appraisal value is at or above the value of the purchase agreement, then you are ready to close on the sale of your home. However, if the appraised value of the home is less than the agreed-upon selling price, you and the seller -- with the help of your real estate agent -- must negotiate an acceptable lower price. If you can't agree on a lower price, you terminate the contract.

As the potential buyer, you do not attend the appraisal; however, the seller may be on hand to answer the appraiser's questions.

The appraiser will measure the home's square footage, take photographs and make notes of the home's condition, both inside and out.

An appraiser considers:
  • Location of the home;
  • Number of bedrooms and bathrooms;
  • Upgrades or remodeled areas;
  • Architectural features such as fireplaces;
  • Materials used for counter tops, floors, etc.;
  • Outdoor amenities like a pool, gazebo, etc.;
  • Functionality and layout of the home;
  • Exterior of the home and materials used;
  • Condition of the yard.
Most importantly, a property value will be assessed based on comparable houses in the area that have sold recently.

Results of the appraisal should be ready in 7 to 14 days, and you and your real estate agent will know how to proceed depending on the results.