The Lowdown On Your Appraisal Report

In order for you to get a loan to buy or refinance a home, your lender will first require an appraisal of the property.  Why?  The appraisal will help your lender determine how much your property is worth, and in turn, how much collateral they will have after granting you a loan.  Zillow's blog recently featured a very helpful guide to interpreting an appraisal report.  

Page 1 - Home Facts

The first page of the appraisal report will contain basic facts about your house.  It will include any improvements/additions to your home and any neighborhood/community it is located in.  It is important to scan this page and verify its accuracy.  The appraiser will use this information to obtain comparable properties in the area for determining your property's market value.

Page 2 - Comparable Homes

The second page of the appraisal report will contain comparables in a chart/table format.  The first column will list your property, then each additional column will contain other properties that the appraiser deems worthy of comparison.  These are referred to as "comps."

The appraiser will include comparable homes sold within the last 6 months, most likely in the same neighborhood or area as yours to minimize differences in value.  The price that each comparable property recently sold for will be under each comparable property's column.  It is very difficult to compare even properties that are similar to yours due to the uniqueness of each property.  It often becomes a point of contention between the homebuyer and the appraiser, when the homebuyer believes comparable properties don't take into account features that his/her own property may or may not have.  However, the appraiser makes adjustments to each comparable property's sale price based on its differences to your property...thereby, negating differences and making the final arrival at a market value of your property more accurate.

In addition, it may be noted that not all adjustments reduce the estimated market value of the subject property. Zillow's blog notes that "if the best comps available are smaller homes, for instance, it could lead the appraiser to make a net positive adjustment to the estimated value on the report. All of the adjustments are then combined into a gross adjustment, which is used in the estimate but also serves as a gage of the confidence the lender should have in the final value. The higher the gross adjustment, the less reliable the report should be considered."

Finally - Estimated Market Value

At the bottom of the second or last comparables page, the appraiser will reveal his/her estimated market value of your property based on the comps in the above chart.  The lender will use this value (estimated market value) to determine how much the lender will loan you.  The estimated market value is also the basis of the loan-to-value ratio that is important in the home finance process.

The appraiser may also include an estimated cost value, which is the cost of replacement of the home. This is often used to obtain home insurance for the homeowner and lender over the life of the loan.

Other pages included may expand on comparable properties or features of your home.

If you have any questions about the appraisal process or would like to discuss the home buying or selling process further, please contact us and we would be happy to assist you in your real estate endeavors.  

Email us at or call us at 207-251-4762.  You can also visit our Facebook page at or Tweet us @AlandRealty!  

Happy New Year!

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