When buying a home, appraisals help determine the property's value and ensure it's a sound investment. Depending on your situation and Lender requirement, several types of appraisals may be required or recommended. Here are the most common:

1. Residential Real Estate Appraisal

  • Purpose: Determines the market value of the home.
  • Key Features:
    • Performed by a licensed appraiser.
    • Considers factors such as comparable sales, location, size, condition, and amenities.
  • When Required:
    • Required by lenders for mortgage approval to ensure the loan amount aligns with the home's value.
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2. FHA Appraisal

  • Purpose: Ensures the property meets Federal Housing Administration (FHA) loan requirements.
  • Key Features:
    • Evaluates property value and checks for safety and habitability.
    • Appraisers follow FHA guidelines, which may be stricter than conventional loans.
  • When Required:
    • For buyers using an FHA loan to purchase a property.

3. VA Appraisal

  • Purpose: Ensures the home meets the Department of Veterans Affairs (VA) standards.
  • Key Features:
    • Includes a valuation and Minimum Property Requirements (MPR) check.
    • Focuses on safety, soundness, and sanitation.
  • When Required:
    • For buyers using a VA loan.

4. USDA Appraisal

  • Purpose: Verifies the value and condition of a property for a U.S. Department of Agriculture (USDA) loan.
  • Key Features:
    • Appraiser must confirm the property is in a USDA-eligible rural area.
    • Includes valuation and habitability checks.
  • When Required:
    • For buyers using a USDA loan.

5. Drive-By Appraisal (Exterior-Only Appraisal)

  • Purpose: Provides a general estimate of a property’s value based on exterior observations and public records.
  • Key Features:
    • Appraiser views the property from the outside and relies on data about the neighborhood and comparable sales.
  • When Required:
    • Sometimes used for refinances or low-risk loans, but less common for home purchases.

6. Desktop Appraisal

  • Purpose: Evaluates a property’s value using digital tools and public records without a physical inspection.
  • Key Features:
    • Relies on online data, such as tax records, MLS listings, and comparable sales.
  • When Required:
    • Often used for quick evaluations or when physical inspections are impractical.
    • May be accepted for certain low-risk loans.

7. Property Tax Assessment

  • Purpose: Determines the property’s assessed value for tax purposes.
  • Key Features:
    • Conducted by the local tax assessor’s office.
    • Evaluates value based on the area and comparable properties.
  • When Required:
    • Not directly tied to home purchases but relevant for understanding property taxes.

8. Rent or Investment Property Appraisal

  • Purpose: Assesses the value of an income-producing property, including its potential rental income.
  • Key Features:
    • Includes market value and an analysis of the property's rental potential.
  • When Required:
    • For buyers purchasing rental properties or multi-family units.

9. Energy Efficiency Appraisal (Green Appraisal)

  • Purpose: Evaluates a home’s energy-efficient features and their impact on value.
  • Key Features:
    • Considers solar panels, insulation, energy-efficient appliances, and other eco-friendly features.
  • When Required:
    • Optional but beneficial for energy-efficient homes.

10. Land Appraisal

  • Purpose: Determines the value of vacant land or lots.
  • Key Features:
    • Factors in location, zoning, topography, and potential use.
  • When Required:
    • For buyers purchasing undeveloped land or lots for construction.

11. New Construction Appraisal

  • Purpose: Assesses the value of a newly built or under-construction property.
  • Key Features:
    • Appraiser evaluates building plans, materials, and progress.
    • May involve multiple inspections at different construction stages.
  • When Required:
    • For buyers financing new construction homes.

12. Retrospective Appraisal

  • Purpose: Determines the value of a property at a specific point in the past.
  • Key Features:
    • Often used in legal disputes or for tax purposes.
  • When Required:
    • Not typically part of a home purchase but relevant for estate planning or settlements.

13. Home Inspection vs. Appraisal

While a home inspection focuses on the condition of the property (e.g., structural integrity, safety), an appraisal is centered on its market value. Both are critical but serve different purposes.

Summary Table of Appraisals

Appraisal Type

Purpose

When Needed

Residential Real Estate

Determines market value

Required for most home purchases.

FHA Appraisal

Ensures FHA loan standards are met

Required for FHA loans.

VA Appraisal

Meets VA standards

Required for VA loans.

USDA Appraisal

Confirms rural eligibility and value

Required for USDA loans.

Drive-By Appraisal

Estimates value with exterior observations

Low-risk loans or refinances.

Desktop Appraisal

Uses online data for valuation

Quick evaluations or certain low-risk loans.

Property Tax Assessment

Assesses value for taxes

Important for understanding property taxes.

Investment Property Appraisal

Assesses income potential

For rental or multi-family properties.

Energy Efficiency Appraisal

Adds value of eco-friendly features

For green-certified homes.

Land Appraisal

Evaluates value of vacant land

For undeveloped lots.

New Construction Appraisal

Evaluates new or under-construction homes

For new builds.



Disclaimer/Disclosures:

The information provided on this website is for general informational and educational purposes only and must NOT be construed as legal, financial, investment or any other expert advice. Real estate investing involves many risks; any content, presentations, pages, blog posts must not be construed as expert advise, results vary based on many many factors and variables.

We make no representations or warranties about the accuracy or reliability of the information provided. 

Always consult a licensed expert, real estate professional and/or financial advisor about your real estate and investment decisions.