A home appraisal is a process of valuing a home or property. An appraiser will determine the property value based on a number of factors, including the materials used on the property, the property’s condition, the location of the property, and more.
A home appraisal represents your home’s true market value and is performed by a professional hired by the bank or lender. The appraised value is the number used by a bank when deciding on how much to loan for refinancing or purchasing a home.
How Do Home Appraisals Work?
Before a property sale can be final, the lender requires an unbiased valuation of the home or property by a professional. The borrower generally pays the fee for an appraisal. The appraiser will complete a visual inspection outside and inside the house, use home factors (square footage, amenities, etc.), current market values, and comparable homes in the area to calculate the property’s appraisal value. If the appraisal of the property is lower than expected, the sale may be delayed or even canceled.
When Does the Home Inspection Happen?
The appraisal is the first step in the closing process, and it’s a crucial one. After a house is put under contract and before the final paperwork is signed, the lender typically orders an appraisal. If the appraisal is at or above the contract price, the transaction will proceed. If below, there are problems. A bank will not grant a loan for more than a house is worth—this goes for both a home sale and for a refinancing loan by a homeowner. Most lenders will not loan any more than 80-97% of a home’s fair market value.
Preparing for a Home Appraisal
Great question! There are a number of ways that you can prepare for a home inspection. We’ve gathered a few of the more popular choices and made a home inspection checklist guide for you to follow.
Get an Early Appraisal
If you are considering selling or refinancing your home, you may not have a good idea of your home’s worth. A home appraisal is generally not ordered by a seller, but it’s not a bad idea to know your property’s value—knowledge is always powerful! Sometimes, your real estate agent can give you a good idea of your home’s value by looking at comps in the surrounding area and by curb appeal. However, if you have serious questions about whether your home’s worth lines up with what you think it is and are concerned it may cause problems during the sale, it may be a good idea to check the true value ahead of time. Just remember that a professional appraiser will charge $300-$500 and that their valuation will likely not be accepted during closing. The lender will hire their own appraiser.
Clean and Fix Your Home
While some things that are factored into an appraisal are beyond your control, keeping your home and property in great condition is one important factor you do have control over. The appraisal has a lot to do with the “bones” of the house, so keeping the structure sound and in good repair is important. A clean, well-maintained house will score higher than one with peeling paint and a damaged porch in the same neighborhood.
Speaking of paint, one of the easiest things that homeowners can do to add value to their home is adding a fresh coat of paint. Fresh paint can knock a decade off a home’s look, giving fresh new appeal with a higher home value.
Improve your House
Safety and security measures for a house can increase value. Be sure you have a good smoke alarm systems installed properly, with a unit in each room. Upgrade where you can and when you can (though last-minute upgrades probably won’t pay). Make sure that all plumbing and lighting is in good working order. Nice clean rugs and modern fixtures in the bathroom and kitchen will also add value. Make sure that no doors or windows stick and that the gutters have been cleared.
Keep Improvements Appropriate
Keep in mind, while improvements to the home are a good thing in general, one “improvement” to avoid is building a non-code room or structure in the house. This can severely negatively impact your home value. You also don’t want to go overboard with improvements based on taste, such as a new chandelier or elaborate paint designs.
Collect the Necessary Documents for the Appraisers
Have a list ready for your appraiser of all the upgrades and improvements that have been completed for the house. Kitchen and bathroom upgrades have the highest ROI potential. By keeping track of repairs and having the paperwork available to the home appraiser, you can demonstrate the care you’ve put into your home.
Invest in Curb Appeal
Never underestimate the value of curb appeal. If a house appears dilapidated or uncared for, an appraiser could end up low-balling the house. The complete visual assessment and appearance is an important factor in their scoring. As we mentioned, touch up the paint, keep the lawn and plants well-watered and trimmed, and make sure any and all external lights are in good working order. A series of small issues can add up into large chunks of value taken from your home appraisal.
There will always be factors that are outside of your control when getting a home appraisal, such as location and market value. However, understanding what a home appraisal is and how it works is instrumental in ensuring that you have your home ready for the process. Don’t be caught off guard, but prepare for the appraisal, and your home sale will be smooth and drama-free.
Contact your local experts at Hero Home Programs if you need help finding an appraiser for your home. Their representatives will be happy to assist you with finding a local professional who can help you determine the value of your home.