How to Read a Home Appraisal Report

The home appraisal report plays a significant role in the home buying process. This article provides a brief overview of its various sections and what is covered in each, so you can gain a better understanding of how to read a home appraisal report.

In this article, we’ll walk you through the Uniform Residential Appraisal Report (URAR), also known as Form 1004. This is the standard form for residential real estate appraisals. 

In accordance with Uniform Standards of Professional Appraisal Practice (USPAP), this report is completed by a licensed appraiser who conducts an interior and exterior inspection of a single-family home to determine its appraised value.

Home Appraisal Report Sections

The 1004 appraisal report is broken down into various sections over five pages. Below is the order each section appears in the appraisal report and what information is contained in each.

Subject section

The Subject section outlines the specifics of the transaction, including the reason for the appraisal, the property’s address, who owns the home, the borrower’s name (if different from the current homeowner), property tax information, and other basic details.  

Contract section

The contract section is used only if the appraisal is for a home purchase transaction. If so, it outlines some of the purchase contract details, including the agreed-upon sales price.

Neighborhood section

This section lists the neighborhood’s features. This includes whether the location is urban, suburban, or rural; its boundaries; how built up it is; and the growth rate. For instance, if there’s a shopping mall nearby, or many homes in this neighborhood are selling quickly, that information would populate this section.

Site section

The Site section covers details about the land. This includes its square footage, view, and shape. If the lot has an irregular shape, it may read, “Refer to Plat Map.” It also covers zoning and whether the property complies with the current zoning.

Improvements section

Moving down to Improvements, this section covers the home’s interior and exterior materials, HVAC (central air conditioning, type of heating, etc.), and amenities—like a fireplace, pool, patio, fence, and more. It also contains information on the home’s garage and he available parking.

You’ll also see the number of bedrooms and bathrooms, square footage, and below-grade square footage, which is typically for the basement. If any upgrades were done, such as a kitchen or bathroom remodel, or if solar panels were installed, those would also be included here.

Sales Comparison Approach section

This is the most important part of the appraisal valuation because it has the comparable sales. These are similar homes to the subject property, located in the same area, preferably within a mile, that have recently sold.

The appraiser uses comparable sales to estimate the value of the subject property by adjusting their differences. Here you’ll see what comparable properties were used and the appraiser’s adjustments.

Following the comparable sales grid, any prior sales of the subject and comparable properties are listed, and there will be a summary of the sales comparison approach. The subject property’s appraised value is shown at the very bottom, listed as $925,000 in the sample report.

Reconciliation and Value section

This is the section where all the approaches to value are reconciled together to come up with the home’s final appraised value. 

Along the top, you’ll see the indicated values by the sales comparison approach, cost approach, and income approach. There should always be a value listed for the sales comparison approach. However, the cost approach and income approach will have values only if the appraiser determines it is necessary to produce those results. 

For more information on the sales comparison approach and how it differs from the cost comparison approach and income approach, you can read our blog here.  

Additional Comments section

Here is where the appraiser elaborates on the adjustments made in the comparable sales grid, why they made those adjustments, and what those adjustments mean.

This is also the section that if you saw something in the report that you needed help understanding, you may find a more detailed explanation here.

Market Conditions Addendum

Next we have the Market Conditions Addendum, also known as the 1004 MC. This gives an overview of how the market is currently standing and how it’s been over the past year.

It is broken down by “Prior 7–12 Months,” “Prior 4–6 Months,” and “Current – 3 Months.” Under each, it lists the number of sales, median sales price, and median days on the market.

Remember that the average sales prices are only for homes located within the same area with similar features and size as the subject property. This allows the appraiser to paint a more accurate picture and substantiate where the market currently stands.

This sample appraisal report shows a stable market, which means home prices aren’t going way up or down; they’re staying consistent.

Building Sketch section

The final piece of the home appraisal report is the building sketch. After the appraiser inspects the home and takes measurements, they’ll use these dimensions and put them into a sketch.

Keep in mind that spaces like a garage, deck, and basement are considered non-living areas and not included in the home’s square footage. The living area (rooms above ground) are shown in the sample sketch as First Floor, Second Floor, and Third Floor.

This section may also include a plat, parcel, and/or aerial map of the property and photos of the subject property and comparable properties. 


For more information about residential appraisals, click here to read additional articles. If you have any questions about the home valuation process, call us at 425-967-3794 or reach out to us here.

Alex Todak