What Do Appraisers Look At During a Home Appraisal?

During a home appraisal, a licensed appraiser looks at the property’s size, physical condition, construction quality, interior and exterior features, the lot and its legal restrictions, and recent sales of similar nearby homes. Those observations feed a supported opinion of market value under the Uniform Standards of Professional Appraisal Practice, which require a credible, well-supported conclusion rather than any single predetermined formula.¹

Measuring the House

The inspection starts with a tape measure. The appraiser calculates the Gross Living Area (GLA), the total finished, above-grade living space measured from the exterior walls. That single number drives the value estimate more than almost anything else, because it represents the usable primary living space buyers compare across homes.

Below-grade space is excluded from GLA even when it’s beautifully finished. A finished basement still adds value, but the appraiser reports it in a separate section of the form. A 2,000-square-foot home with an unfinished basement and a 1,500-square-foot home with a 500-square-foot finished basement are not equivalent in the market, even though both contain 2,000 square feet of space.

The appraiser also documents the bedroom and bathroom count and cross-references those numbers against public records to catch discrepancies. If a room was converted or a bathroom added without permits, that shows up here.

Features Inside and Out

Secondary features get noted with their condition: garages, decks, covered porches, pools, outbuildings, fireplaces, and built-in appliances. Context shapes their contribution. A three-car garage in Minnesota contributes more value than the same garage in southern Florida, because the market reaction to the feature varies by location.

Personal property is excluded from the valuation entirely. Furniture, appliances that aren’t built in, window treatments, and anything else you could pick up and carry out of the house aren’t part of the real estate value. The appraiser values only the land and the permanent structures attached to it.

Condition and Quality Ratings

Every appraisal assigns two standardized ratings: one for condition, one for construction quality. These follow the Uniform Appraisal Dataset definitions used by Fannie Mae and Freddie Mac, so they read consistently across appraisers nationwide.

Condition ratings run from C1 to C6:²

C1: Brand-new construction, never occupied. No physical wear whatsoever.
C2: No deferred maintenance and virtually no wear. Either nearly new or recently renovated to like-new standards.
C3: Well maintained with only normal wear. Some components may have been updated, but not necessarily all of them.
C4: Minor deferred maintenance and normal wear. The home has been adequately maintained and needs only cosmetic or minimal repairs.
C5: Obvious deferred maintenance requiring significant repairs. Still functional as a residence, but livability is somewhat reduced.
C6: Substantial damage or deferred maintenance severe enough to affect safety or structural integrity. Major repairs and rehabilitation are needed.

Most resale homes land in the C3 or C4 range. A C5 or C6 rating can complicate financing, because some loan programs won’t approve mortgages on properties needing major repairs. Construction quality ratings (Q1 through Q6) work the same way, ranging from architect-designed custom homes at Q1 down to basic economy-grade construction at Q6.²

The appraiser also estimates the property’s effective age, which can differ significantly from its actual age. A 30-year-old home with a new roof, updated kitchen, and modern mechanical systems might have an effective age of 10 years. A 15-year-old home with a failing roof and original everything might rate an effective age of 25 years. That effective age directly feeds into the depreciation calculation.

The Lot and Legal Restrictions

The appraiser evaluates the land itself, independent of whatever sits on it. Lot size, shape, topography, and available utilities all factor in. A steeply sloped lot or an oddly shaped parcel that limits future use will be noted and adjusted against flat, regularly shaped comparables.

Legal encumbrances get scrutinized. The appraiser reviews public records for easements, encroachments, and rights-of-way that could limit how you use the property. A utility easement running through a backyard, for instance, prevents building in that strip. Fannie Mae requires the appraiser to assess how these factors affect both value and marketability.³

Zoning classification is verified through public records to confirm the existing use is legal. A duplex sitting in a single-family zone is a non-conforming use that can limit financing options and shrink the buyer pool.

The appraiser also identifies the property’s FEMA flood zone designation and records the specific zone, map number, and effective date on the appraisal form.³ A high-risk flood zone designation triggers mandatory flood insurance requirements and tends to depress market value. Restrictive covenants and mandatory HOA fees get noted too, since they represent ongoing financial obligations and use restrictions that affect what buyers are willing to pay.

Comparable Sales

Once the inspection is done, the appraiser turns to the market. The sales comparison approach carries the most weight in a residential appraisal. The appraiser identifies recently sold properties that closely resemble the subject home in location, size, construction type, and features. These “comparables” or “comps” should ideally be recent closed sales from the same neighborhood. Older sales, or active and pending listings, serve as supporting evidence when recent closed transactions are scarce, but they don’t replace actual sold data.

Each comp’s sale price gets adjusted for differences from the subject property. Every adjustment is made to the comp, never to the subject. If a comp has a pool and the subject doesn’t, the appraiser deducts the pool’s contributory value from the comp’s sale price. If a comp lacks a feature the subject has, the appraiser adds that feature’s value to the comp’s price. The goal is to standardize each comp to show what it would have sold for if it were identical to the subject.

These adjustments must be market-based, meaning they reflect what buyers in that specific market actually pay for a given feature, not the cost to build it or some arbitrary rule of thumb. Fannie Mae states there are no fixed limits on adjustment size. The appraiser must document the data and reasoning behind every dollar adjustment.⁴

Sales or financing concessions in the comps get separate treatment. If a seller paid the buyer’s closing costs or offered other incentives, the appraiser adjusts for the portion of the sale price that was inflated by those concessions. The adjustment isn’t a dollar-for-dollar deduction of the concession amount; it’s an estimate of how much the concession actually inflated the price.⁴

The appraiser also analyzes broader market conditions: supply and demand, average days on market, and price trends. A market with shrinking inventory and fast-moving sales suggests upward pressure on values. That context helps the appraiser decide whether time adjustments are needed for older comp sales.

Extra Checks on FHA and VA Appraisals

If your loan is backed by FHA or VA, the appraisal adds a layer of health and safety inspection that conventional appraisals skip. FHA’s Minimum Property Standards require the home to meet three criteria: safe for occupants, secure from the elements, and structurally sound.⁵

The appraiser checks for functional heating, working electrical systems with no exposed wiring, adequate water supply and hot water, and no obvious hazards. For homes built before 1978, any chipping or peeling paint triggers a lead-based paint concern that must be resolved before closing. Roofs with less than two years of remaining life, missing stair handrails, and foundation cracks are common items that cause FHA appraisals to come back with required repairs.

HUD also sets specific durability requirements that go beyond standard building codes, covering items like doors, windows, gutters, and kitchen cabinets, because the property serves as collateral for the government-insured loan.⁵ A conventional appraisal notes these issues as condition factors, but it won’t mandate repairs the way an FHA appraisal will.

Reviewing the Report

Federal law entitles you to a free copy of the appraisal. Under Regulation B of the Equal Credit Opportunity Act, your lender must provide you with a copy of every appraisal and written valuation developed in connection with your mortgage application, promptly after completion and no later than three business days before closing.⁶ The lender cannot charge you for providing the copy itself, though you are still responsible for the underlying appraisal fee.

Read it carefully when it arrives. Check the comparable sales for accuracy, verify the bedroom and bathroom counts, and confirm that recent renovations were noted. Errors happen, and catching them early gives you time to request a correction before the mistake affects your loan approval.

1
Appraisal Subcommittee. USPAP Compliance and Appraisal Independence
2
Fannie Mae. Property Condition and Quality of Construction of the Improvements
3
Fannie Mae. Site Section of the Appraisal Report
4
Fannie Mae. Adjustments to Comparable Sales
5
U.S. Department of Housing and Urban Development. Minimum Property Standards Resources
6
Consumer Financial Protection Bureau. Regulation 1002 – Section 14