Portland, Oregon Home Appraisal FAQ

Updated 09/2024.

Home inspections and appraisals have a lot in common: both are key to the home sale transaction, both involve a third party coming into the home to form an assessment, and both can be stressful for home buyers and sellers!

That’s about where the similarities end. In this article, we break down the difference between the two and do a deep dive into the world of appraisals so you are prepared as a buyer and seller.

What is the difference between the home inspection and appraisal?

A home inspection is a physical inspection done by a certified inspector to spot existing and potential issues within and around the home. Examples are mold, termites, construction issues, and poorly working systems (sewage, electrical, etc). The inspector’s work is performed on the buyer’s behalf and often shapes the sale negotiation and final contract.

A home appraisal has some similarities to inspections but includes other factors and has a different goal. The potential buyer’s mortgage lender uses a certified appraiser to determine the fair market value of a property, affecting how much money the lender is willing to pay for the home and loan to a buyer. The appraiser evaluates the home’s basic features, livability, health and safety, and outside forces like the value of similar homes on the market.

Both inspections and appraisals greatly influence a home’s sale. Poor inspection results potentially mean more fixes and repairs for the buyer and/or a lower resale, which can also jeopardize the sale. A low appraisal means less money for a mortgage, which can put the buyer out of the running for a home. On the positive, a home with a stronger-than-expected valuation can open the door to more funds that a homeowner can use for improvements.

How are appraisals done?

Here are the basic steps involved in appraisals.

Research

The appraiser investigates the property’s history, previous sale prices, current real estate market trends, and any known issues. They also gather information on the neighborhood, such as recent sales of comparable properties, known as “comps,” which are crucial for determining the home’s value. The appraiser also evaluates school proximity, public transportation, shopping centers, and overall neighborhood desirability.

Sure, a good listing agent will have already gathered this information before they and the seller set the asking price for the home. (That’s the real estate agent’s job, and it’s also their job to fetch the most money for the home that the Portland real estate market will bear!) But it’s the home appraiser’s job to verify the information to ensure the buyer pays a fair price for the home.

On-Site Inspection

The appraiser visits the property for an on-site inspection unless it is a desktop appraisal (We cover this in a bit). During the visit, they measure the home’s square footage, count the number of bedrooms and bathrooms, and assess the home’s overall condition. They also note significant features such as a finished basement, a new roof, or upgraded kitchen appliances. They also evaluate outdoor factors like landscaping, curb appeal, and any outbuildings.

Valuation

The appraisal pulls together the findings to calculate the home’s market value and prepares an “appraisal report.” The report includes the appraiser’s findings, methods used to calculate the home’s value, and the final valuation. The report then goes to the lender who uses it to decide how much money to lend the buyer for the home.

The use of desktop appraisals

Desktop appraisals (also known as desk appraisals) are those done by banks using computer programs to determine the value of a home. In these cases, an in-person appraisal is waived.

Desktop appraisals became more common due to COVID-19, but they were around before and are still used today. They could increase in the future, but it’s hard to say for sure. More appraisal companies are using 3D virtual walk-throughs when provided by the real estate agent (all of our homes for sale come with 3D walk-throughs). Also, some appraisers engage with the homeowner to obtain live-stream video walk-throughs of the property, but that is not a common practice yet.

Desktop appraisals are unlikely to fully replace physical appraisals, but they do offer some benefits worth knowing:

● They are very efficient and save money for both the sellers and buyers.

● They work well in low-risk sales scenarios.

● For HELOCs, lenders may request desktop appraisals to ascertain the property’s value and set the credit limit.

● A desktop appraisal can be used when challenging a tax assessment

● Lenders or other clients may order desktop appraisals to determine a property’s replacement cost or insurable value.

● Investors owning multiple properties can use desktop appraisals to provide quick and easy updates on property values.

Why is an appraisal necessary?

Since the mortgage lender is the one actually purchasing the home, the lender wants to make sure they can get their money back out if the buyers end up foreclosing. Home appraisals are a pretty good system to prevent overzealous buyers from paying too much for homes and inflating prices everywhere.

Who pays for the home appraisal?

The home buyer pays for it upfront or as part of their closing costs with the bank. Even though the buyer pays for it to obtain the home loan, the appraiser’s “client” is actually the bank giving the loan. The appraiser works on the bank’s behalf to ensure the loan they provide reflects current home values.

When will the home be appraised?

In Portland, the home appraisal is typically ordered after the buyer makes a successful offer and both buyer and seller have gotten through the inspection period (typically 10 business days or 2 weeks). In a simplistic summary of a home sale, here are the chronological steps:

● Negotiating offer

● Negotiating inspections

● Passing the appraised value

● Final closing at escrow

How do I prepare my house for an appraisal?

When you are in a pending sale with a home buyer, you likely have gotten through the inspection period before the appraiser arrives. This means that outside of agreed-upon repairs, the home needs to stay in the same condition as when the buyer made the offer. Of course, if you want to make additional repairs (outside of any agreed on already) before the appraiser comes in, that’s fine, but you need to notify the home buyer and get their permission first to avoid potential problems.

On top of general home repair projects (stained flooring, broken windows, etc.), you want to ensure your home has the best curb appeal possible. If you’ve already gone through the usual steps for increasing home appeal, such as trimming your lawn, landscaping, and painting your door, you’re set for your home appraisal. Just be sure to clean up any lawn clippings or leaves on the ground to really sell your curb appeal. Why? Appraisers are humans, too. A good impression helps your valuation.

Though things like home appliances, HVAC systems, and other home staples impact your home appraisal, now isn’t the time to do costly renovations on these systems. Instead, just ensure they’re in working order and clean if necessary because they can impact your home appraisal.

What negatively affects a home appraisal?

Things that can negatively impact your home appraisal include:

■ Old appliances and HVAC systems

■ Messy, unkempt lawn or low curb appeal (damaged siding, etc.)

■ General disrepair (broken cabinets, old appliances, broken windows and screens)

■ Large issues like plumbing leaks and problems, broken lights, etc.

In general, small, easy repairs are imminently within your control and also worth doing. Keeping up on your home repairs speaks to the overall condition of your home. If you can fix it in a few minutes, go ahead and do it. You can’t control everything that can negatively impact your appraisal, such as the surrounding housing market, overall home location, and the age of your home, but keeping up small repairs and curb appeal goes a long way toward a positive home appraisal.

Does a clean house affect an appraisal?

It does, but as a seller, you don’t need to go overboard. Your home should be tidy, but it doesn’t need to be spotless.

A home appraiser is focused on signs of damage and infestation (health and safety issues), and a clean home helps with that, but you don’t need to provide a perfectly clean home. Ensure that all appliances and HVAC systems are easy to access, and maybe sweep your floors, but there’s no need to make your home as spotless as you would need for a potential buyer viewing your home. Cleanliness won’t impact the overall appraisal as long as you have no underlying issues.

Should the seller be present for the appraisal?

The seller should be on hand to present the appraiser with a list of any upgrades and then only engage in conversation if they seem amicable. Some appraisers refuse to speak with sellers directly, but some appreciate any details on the home itself. The appraiser may also have some basic questions and need help accessing certain areas of the home, like an attic or crawlspace, so it can be helpful for the seller to stick around.

Can an appraiser require home repairs?

Yes. Even though the home buyer and seller have likely gone through a home inspection and completed repairs or given credits or price reductions in lieu of repairs, the appraiser can still require that repairs be done before closing (before the bank lends the money for the home sale). It isn’t very common, and appraisers typically only call out health and safety factors.

What happens if the home appraisal comes in low?

The most common problem with appraisals is when they come in too low. This often happens when the market is hot, homes are moving quickly, and a buyer in a multiple-offer situation wants to make a high offer with no comparables to back it up.

If the appraisal comes in low, there are three things you as a buyer can do:

1. Walk away. A home purchase is often contingent on appraisal, and yours may be too. You can walk away from the deal and get your earnest money back if the appraisal comes in low and the bank won’t lend the money. You typically lose the cost of whatever inspections you ordered and the cost of the appraisal itself.

2. Renegotiate the price with the seller. Often, the appraisal is a “reality check” for both the buyer and the seller.

3. Appeal the appraisal results. If you and your agent truly feel the home is worth what you offered, find evidence to back it up. Look through the appraiser’s report and find what they missed — maybe it’s a feature that adds value to the home, or maybe it’s a comparable showing that the home could sell for more on the Portland real estate market.

4. Worst-case scenario, you can order a new appraisal. Often, you would have to change lenders to get an entirely new appraisal done, something you may be highly unlikely to do. Note that this option isn’t impossible within set time frames on certain home loan types (FHA, VA, and more).

Appraisals for older homes in Portland

Old homes are part of Portland’s soul and character. At the same time, appraising them presents challenges that affect their value. Examples include potential health hazards like unsafe floors, walls, and roofs, as well as other issues like outdated plumbing, electrical systems, and heating infrastructure. These are all factored into the appraisal, directly influencing the home’s value.

How do I know if I can trust the appraisal?

Home appraisers don’t just walk in off the street; they are licensed professionals working under strict federal and state requirements. In any state, real estate appraisers must have college-level education, complete pre-licensing courses, acquire industry experience, and pass the appraiser exam. In Oregon, potential appraisers must gain 2,000 hours of experience before getting a license. Read the full list of licensing requirements here.

Of course, mistakes still happen, just as they do in any profession. A good real estate agent will know when an appraisal is wrong and can help you appeal the appraisal results. (I have personally had to appeal appraisal results in the past and won the argument!)

Work with an experienced local realtor

If you have more questions about home appraisals, inspections, or any other aspect of buying or selling a home, contact one of our top 1% selling or buying agents. We’ve been working in the greater Portland metro since 2003. We’re friendly, low-pressure, and happy to answer questions about the Portland real estate market anytime!