How Home Appraisers Determine a Home’s Value: Step by Step Guide

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black home appraiser

There are two ways to determine a home’s value: what a buyer pays for it, and what a home appraiser says it’s worth. The latter is far more important.

You may list a 200 square foot fixer upper home in the middle of nowhere for $2,000,000; and someone might offer you that amount.

But if that someone, like most people, is getting a loan from a mortgage lender to pay for it, then the bank will only loan them the amount of money that a home appraiser says the property is worth.

That is why it is critically important to understand how appraisers determine a home’s value. Again, you may accept an offer on your home for one price, but if an appraiser determines the home isn’t worth that much, then the buyer of that home may not have the necessary financing to close the deal.

The Importance of Determining Home Values – Protect Ya Neck

There have been numerous stories and studies of how homes in black neighborhoods are undervalued. The below information should at least give you a glimpse into how this closed-knit circle of appraisers do their jobs.

According to the Appraisal Institute, there are 78,000 appraisers. Only 1.3% of them are black. That means there are only around 1,000 black appraisers in the entire country!

There’s a pretty big chance that an appraiser, who is not black and has never been to a majority black neighborhood, will appraise your home.

Your home is likely your biggest asset. You better have a sense of how it’s value is determined while you’re waiting for the appraiser to come up with their assessment.

steve harvey waiting on home appraisal results
This home better appraise!

We need more black home appraisers so check out this initiative by the Black Real Estate Professionals Alliance to learn how to become one if you or a friend you know is interested.

It takes years and hundreds of hours of apprenticeship to become a licensed appraiser. Chances are, if you’re reading this, your goal isn’t to become one. Rather, you’re a homeowner, home buyer, real estate agent or an investor trying to get a good estimate of what a property is worth.

There’s a saying in real estate – you make money on the buy. In other words, as soon as you close on a home, ideally, you want to be profitable from day one.

Over time, your property will appreciate (gain value) and your equity/wealth will increase. But again, you don’t want to be underwater on your home from day one, you want to make money or at least break even.

This is where the importance of figuring out what a property is worth comes into play. Now, a good real estate agent should know how to do a comparative market analysis(cma). This is very similar to how appraisers determine a property’s value by looking at similar properties in the area.

Unfortunately, whatever number an agent comes up with is not official. It’s their opinion of the market value of a home.

Of course, it can be used to set the listing price for a home or to make an educated offer on a home. But, the buyer of said property, will still need to have the property appraised by a licensed appraiser before a lender will lend the money needed to purchase the home.

Appraisers use comparables, comps, to figure out what a home is worth. House A down the street sold for 250K and it’s just like this house, referred to as the subject property, so this property is worth 250K.

Here are the exact steps to how a home appraiser determine’s a property’s value as broken down in a recent video where hundreds of home appraisers were interviewed.

home location


When comparing properties to determine a home’s value, they look for properties that are within the same subdivision. If there is a suitable comp within a mile of the subject property, the appraiser will use the closest one.

How do you know if you’re in the same subdivision? If you don’t have to cross any major roads and highways, then you’re in the same comparison area.

Appraisers would rather time travel, than distance travel. They will go back sometimes as far back as 6 months than leave the area to find a comp. Given a quickly changing market, try to focus your analysis on the past 3-6 months.

Square Feet

The subject property and the comp should be no more than 200 square feet apart (plus or minus). This means that if the subject property is 1000 square feet, the comp should be within 800-1,200 square feet.

Don’t make the mistake of trying to take the dollar per square foot of some other(larger) property and try to apply it to the subject property. That will inflate the value and that’s not how it’s done.

Property Type

Compare single story ranch styles to other single story ranch styles, homes in historic districts to other homes in historic districts, tudor style properties to other tudors. Same construction styles etc…

Quick tip: Single story homes are worth more because more buyers like them. Stairs decrease the demand on a property. Think about it, older people don’t like going up and down stairs.

home floor plans for square footage

Build Generation

Appraisers usually only go as far as 5 years of construction when comparing two properties. Therefore, you can compare a property built in 1960 to a property built anywhere from 1955-1965.

This is because technology has evolved. Advancements were made in certain years where homes were built with much better quality than homes built in the 1990s for example. The plumbing, electrical, roofing materials have all evolved and this matters for property values.


It’s hard to find the exact same property all the time. For example, you may compare a 4BR/3BA with 2,000 square feet to a 4BR/2BA with 2,000 square feet.

How do you make an adjustment for the extra bathroom? It depends on the property values:

If the property is worth less than 500K

  • Extra Bedroom? Worth an extra 10K
  • Extra Bathroom? Extra 10K
  • Pool? 10K
  • Car Port? 5K
  • Garage? 10K

If the property is worth more than 500K

  • Extra Bedroom? Worth an extra 20K
  • Extra Bathroom? 20K
  • Pool? Extra 20K
  • Car Port? 10K
  • Garage? 20K
home on busy street


How do you make an adjustment for a property that is near traffic, proximity to commercial or high density multifamilies? Depends on property values.

Below 500K

  • If you are siding or backing traffic or high density areas, subtract 10K.
  • If you’re fronting it, subtract 20K.

Above 500K

  • If siding or backing traffic, or commercial, subtract 10%.
  • If fronting it, subtract 20%.

Basements and ADUS

Did you finish your basement or do you have an ADU(additional dwelling unit), also called a mother in law house. It’s basically an extra smaller structure on your property.

Usually, an appraiser will only use square footage above grade. Sometimes, the appraiser will give you 50% maximum value for a basement or an additional dwelling unit.


Hopefully, these appraisal rules will help you get a better sense of how home values are determined. It’s not rocket science.

Yes, it’s part art, part science but if you have a basic understanding of how this works, then you should question any home value assessment that is way off from your expectations.