10 Easy Ways to Prepare Your Home for Appraisal

10 Easy Ways to Prepare Your Home for Appraisal

What Do Home Appraisers Look For?

Appraisals are not performed by your mortgage company. Most state laws require that only an independent third party may perform a property appraisal, though your mortgage lender may help schedule or arrange the appraisal.

During the actual inspection, an appraiser looks at a number of factors in the home to determine its value. Some of the things that appraisers consider when they determine a home’s value include:

  • The basic condition of the home: The appraiser won’t check to see if outlets are working or consider the paint color on the walls when they assign a value to the home, but they will assess the home’s basic condition. The appraiser counts the number of bedrooms and makes sure each one has a window and a closet. They also check for health and safety considerations, such as the presence of lead paint, and check to see if the HVAC system and cooling system are functional. They will also make sure that someone could reasonably live in the home. If they determine that someone cannot, expect the appraisal value to be significantly lower than surrounding homes that are in livable condition.
  • Upgrades: Your appraiser will look at any upgrades or improvements you made to the property. The upgrade needs to be a permanent fixture of the home if you want it to increase the home’s If you can take it with you when you move, your appraiser probably won’t consider it an upgrade. The appraiser also considers upgrades outside of the home’s living space, including upgrades to the garage, pool or basement.
  • Other homes in your area: Appraisers don’t just look at your property when they assign a value to your home. They also look at public records of other homes near yours. Because location is a major factor in determining the value of a property, appraisers will look at what similar homes have recently sold for, and how property values trend.

After the appraiser finishes their research, they make a final valuation of the property in a formal report. The appraiser then delivers the report to your mortgage lender.

What is a home appraisal?

A home appraisal is when a licensed professional comes to your house to assess its value. The appraiser determines home value based on market conditions, home amenities, curb appeal and more.

As a seller, you may want to get a home appraisal before listing your house for sale so you can figure out how much your home is worth and use that information to price it competitively. As a buyer, your lender usually requires a home appraisal while processing your loan application, so they don’t lend you more than the home is worth. Either way, you’ll want to get an appraisal before closing to make sure you’re getting a good deal.

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How to prepare

Maximize your home value ahead of time, so your home appraises as high as it can. This may include significant work such as home renovations, or simple tasks like the ones listed in the checklists below:

Appraisal checklist for buying a home

  1. Review neighborhood home values and recent sales

  2. Assess your desired home’s condition so you can plan ahead for necessary repairs

  3. Include an appraisal contingency so your offer can be withdrawn if the appraisal comes up short

Appraisal checklist for selling or refinancing a home

  1. Ensure your landscaping is on point as “curb appeal” is considered during an appraisal

  2. Repairing damaged drywall or painting rooms can factor into your valuation

  3. Make sure every light switch, wall outlet, fan, or vent works

  4. Document recent home improvements with estimated prices and dates

  5. Provide copies of previous appraisals

  6. Make sure all rooms of the house are accessible

  7. Be flexible and coordinate the appointment around the appraiser’s schedule

  8. Let the appraiser do the inspection without distraction

Tip: if you have an FHA loan and are doing a streamline refinance, typically an appraisal isn’t needed.

Be aware of the $500 rule

Appraisers tend to value property in $500 increments – like $300,000, $300,500, $301,000, etc. Because appraisals with $500 increments are common, it’s in your best interest to make small repairs if you are selling your home or refinancing. Even the smallest of changes can contribute to the overall condition of your property.

Want a better understanding of home value? Read our guide on appraised value vs. market value vs. assessed value.

Takeaways

While avoiding an appraisal altogether might not be an option for those financing the purchase of their home, there are ways you can positively influence the outcome.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.

3. Getting a home equity loan

Unlike refinancing, home equity loans are a second loan on top of the existing mortgage. The amount you can borrow in a home equity loan is based largely on the amount of equity you have after the remaining value of the mortgage is subtracted from the current value of the house. If your home has decreased in value, you may not be eligible for a home equity loan.

What Home Sellers Need to Know About Appraisals

As a seller, a low appraisal, if accurate, means you may have to lower your home’s price to get it sold. Holding out for an all-cash buyer who doesn't require an appraisal as a condition of completing the transaction is unlikely to net you a higher sales price. No one wants to overpay for a home.

Unfortunately, if your surrounding area has experienced recent distressed sales, that can lower your home’s appraisal value. If you feel that your home’s value has been dragged down by the sale price of nearby foreclosures and short sales, you may be able to convince the appraiser that your home is worth more if it’s in significantly better condition than those properties.

Getting an appraisal is also a required step when giving a home to a family member as a gift of equity.

The Next Steps After An Appraisal

After your home appraisal is complete, the appraiser will assign a monetary value to the property based on the findings in the inspection and comparables in your area, and then send their findings to the mortgage lender.

Your loan amount will be based on the number that the appraiser assigns to the property, so if they say the home is worth $190,000, your lender will only loan that exact amount, minus any required down payment. This is unfortunate for the seller if they have the home listed at a higher price, as the lower home appraisal will affect their chances of getting that amount on the sale of their property.

However, if the home is appraised at or above the asking price, the loan will be processed and you will be able to begin closing on your home.

What Is an Appraisal Report?

Typically, appraisers use the Uniform Residential Appraisal Report from Fannie Mae for single-family homes. The report asks the appraiser to describe the interior and exterior of the property, the neighborhood, and nearby comparable sales. The appraiser then provides an analysis and conclusions about the property’s value based on their observations.

The appraisal report must include:

  • A street map showing the appraised property and comparable sales used
  • An exterior building sketch
  • An explanation of how the square footage was calculated
  • Photographs of the home’s front, back, and street scene
  • Front exterior photographs of each comparable property used
  • Other pertinent information—such as market sales data, public land records, and public tax records—that the appraiser requires to determine the property’s fair market value.

When refinancing a mortgage, if the appraisal value puts your home equity at less than 20%, you’ll get stuck paying for private mortgage insurance (PMI).

How is a home appraised?

During a home appraisal, a licensed appraiser conducts a thorough inspection of the property.

The appraiser will consider all factors that could affect the property’s value. These factors include the condition of the property, any upgrades or additions made to the property, the size of the lot and “comps” or recently sold properties of comparable size and condition in the same market.

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How Long Is A Home Appraisal Good For?

Generally, a home appraisal is good for a total of 120 days (4 months). If you do not close on your home within that time, you will need to have another assessment. Some people may be afforded an extension, but only in certain circumstances and only if they’re eligible. The exception is the VA, which has a 180-day timeline for most valuations except for IRRRLs (VA Streamlines), which have 4-month timelines.

An appraisal has a short lifespan because market conditions change. Home sales from 6 months ago might be drastically different from those in more recent months, especially if the real estate market is volatile.

What does an appraisal cost and who pays for it?

Usually, the home buyer pays for the appraisal (or the homeowner in the case of a mortgage refinance). An appraisal cost varies depending on the location and type of property, but you should expect to pay between $400 and $1,000.

Typical appraisal price ranges for appraisals are as follows:

  • Conventional loans usually cost somewhere between $500-$650

  • FHA almost always costs at the higher end of this spread at $650

  • VA loans are often around $750, but vary by property type and state

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