9 Things to Know BEFORE Your Home Appraisal
Here’s what you want to know about your home appraisal and the role it plays when buying a home.
After spending several weeks touring homes throughout Raleigh, you have finally found the home of your dreams. The seller accepts your offer and you are officially under contract and the home will be marked contingent. Your mortgage lender informs you of the next step in the process: the home appraisal. While the process may sound intimidating, there is no reason to be alarmed. A home appraisal is typically required by all mortgage lenders and is a necessary step in securing a loan to purchase a property.
1. What is a Home Appraisal?
A home appraisal involves analyzing a home in person and conducting a comparative financial analysis of the property to determine its value. Mortgage lenders will almost always require a home appraisal when buyers apply for a loan, as lenders want to ensure the buyer isn’t overpaying for the home. Mortgage lenders do not want to lend more money for a home than the home is worth. If the buyer defaults on their mortgage payments, the lender is stuck with an overpriced home that will not deliver a strong return on investment when they sell. Home appraisals are also ideal for buyers because it determines if the seller is asking for more money on a home than the home is worth. If a buyer plans to buy a home in Raleigh for $400,000 but the appraisal determines that the home is only worth $315,000, which gives the buyer an additional $75,000 in negotiating power that they wouldn’t have otherwise. While home appraisals are commonly requested when a buyer prepares to purchase a property, homeowners may also be required to obtain an appraisal when refinancing their mortgage.
It is very important to note that mortgage discrimination – both here in North Carolina and throughout the United States – is illegal. Mortgage lenders are legally required to abstain from discriminating against a borrower on the basis of sex, religion, race, marital status, disability, age, national origin, or use of public assistance. If you believe you have been illegally discriminated against by your mortgage lender, you can file a report with the U.S. Department of Housing and Urban Development (HUD) or the Consumer Financial Protection Bureau.
2. How much does a Home Appraisal Cost?
While the cost of the appraisal varies depending on the size of the home as well as the part of the country, an appraisal in Raleigh, North Carolina will typically range between $300 and $450. If an appraiser has to do a significant amount of work while conducting the appraisal, it may cost more than that. Appraisals can range in price in different parts of the country.
3. How long does a Home Appraisal take?
Home appraisals are typically fairly quick, only lasting about 30 to 45 minutes. If your home is significantly large or complex, it may take longer than that. While at your home, they will photograph every room, including the garage and home’s exterior. They will also take measurements of various aspects of the home. In addition to doing a physical inspection, the appraisal company will also do a comparative financial analysis of other homes in the area and assess how much they sold for. After doing the physical appraisal and running the comparables report, they will provide you with the appraisal report. It typically takes the appraisal company anywhere from 7 to 10 days to finalize the appraisal report and send it to you. Your mortgage lender is legally required to send you the appraisal report and cannot withhold it from you.
4. What do they look for in a Home Appraisal?
Appraisers look for many different things when they are appraising a home including:
Signs of disrepair
When conducting a home appraisal, an appraiser will generally be on the lookout for considerable signs of disrepair. They will spend time looking at the walls, floors, carpeting (if applicable), kitchen appliances, bathrooms, materials used throughout the home, HVAC system, roof, and the home’s overall exterior. Generally, they are looking for items that are a safety hazard, broken, and/or are malfunctioning.
Water damage
The presence of water indicates that mildew or mold may be found in the home. For that reason, the appraiser will assess the condition of the walls, floors, ceilings, attic, basement (if applicable), and other areas of the home for water damage. If minimal water damage appears on your appraisal report, you may be able to repair the problem on your own to put the buyer at ease. Signs of water damage typically include water stains in the ceilings, walls, and/or floors and is an important element in the appraisal process, as mold poisoning is extremely toxic to those who are exposed for an extended period of time.
Size of the home
In addition to looking at the physical home, they will also consider the square footage, bedroom count, upgrades in the home, and other property details. In addition to the home’s square footage, the appraiser will consider the size of the home’s garage and the size of the lot the home sits on. Of course, those factors will not all be considered if it is an apartment.
Infestation
Any signs of infestation will have a negative impact on the appraisal report, as that is a safety problem. Pests can do considerable damage to a home’s structure – especially termites – so an appraiser will look for any signs of unwanted visitors along with the windows, ceilings, and floors.
Comparable properties
The appraiser will analyze homes in the surrounding neighborhood and consider their sale prices. If you are planning to buy a $400,000 home but other homes in the neighborhood that are similar in size sold for $350,000, your mortgage lender may only be willing to lend you $350,000. If that happens, your real estate agent will have to negotiate with the seller to see if they will bring their sale price down to $350,000. If they won’t budge on price, you will either have to come up with the $50,000 that your mortgage lender won’t loan to you, or you will, unfortunately, have to walk away from the deal altogether.
5. How to Prepare for a Home Appraisal
Homeowners can take several steps to prepare for a home appraisal and providing the appraiser with the information necessary can help expedite the appraisal process. Additionally, the more information the appraiser has about your home, the more accurate the appraisal process will be. Some of the items included in the link below may be difficult to access. If you cannot obtain some of the information in this list, don’t stress. Provide what you can to the appraiser and they will work with the information provided.
Prior to beginning the appraisal process, have the following documents ready for the appraiser:
- The legal description of the property
- Most recent real estate tax bill
- A list of improvements and upgrades that have been made on the home (include the installation date and repair cost)
- A surveyor plot plan of your home (if accessible)
- Title policy with easement or encroachment information
- Information regarding a shared driveway or other property agreements applicable to the home
- If you are selling the home, provide a list of any items that will be sold along with the home (For example, a chandelier, furniture, etc.)
- If a property has been purchased within the last three years, information regarding the purchase of the property
- If you are in the process of selling the home, provide the listing agreement, purchase agreement (if applicable), and broker’s datasheet
- If you live in a condominium, provide a total of the fees paid to the Homeowners Association
- Provide all home inspection reports you have available, including information regarding a termite inspection, septic system, wall systems, etc.
In addition to having those documents in place, it is also suggested to do the following prior to the home appraisal process:
- Clean your home and try to make it as presentable as possible in preparation for the appraiser. The cleaner your home, the better impression you will have on the appraiser.
- If door handles are missing, faucets are leaking, paint is peeling, tiles are cracked, or other small fixes are needed, try to take care of those before the appraisal.
- Clear any clutter away from the attic, basement, or crawl space areas.
- If you are obtaining an FHA or VA loan, you will need to install smoke detectors on every level of the home, peeling paint must be repainted, handrails must be installed on all stairways, and access must be given to the attic and crawl spaces.
6. Should I guide the Appraiser Through my Home?
You do not need to be physically present during the home appraisal process, but be accessible via phone in the event the appraiser has questions while assessing your home. If you are selling your home through a real estate agent, your agent can accompany the appraiser and tour them through the home. If you do not feel comfortable leaving your home during the appraisal process, you can be present during the appraisal process, but try to give them some space as they assess the home – no need to follow the appraiser room to room. If they have questions regarding upgrades or if they need to know where something is located in the home, they will be sure to ask. If you have questions for the appraiser, they may not be legally allowed to share all of the information with you. This is because the mortgage lender is technically considered their “client,” so they may only be allowed to share certain information with the lender. Appraisers are regulated on both the state and federal levels, so if there is any information they cannot provide to you as the homeowner or to your real estate agent, they will give it to the mortgage lender.
7. Who pays for a Home Appraisal?
If you are selling your home, the buyer will most likely pay for the appraisal, but the buyer’s mortgage lender is typically the one who will order it. In the event that the sale doesn’t go through, the cost of the appraisal is typically non-refundable. If you are refinancing your mortgage, you will typically be responsible for paying for the home appraisal.
8. What can hurt a Home Appraisal?
While some aspects of the appraisal process are out of the homeowner’s control – such as the comparables report and the state of the real estate market – there are other elements that are very much in the homeowner’s power. If you are in the process of having renovations or repairs completed on your home, or if you have contracted the work but it has not yet been started, be fully transparent with the appraiser on exactly what work is being done. Provide them with the estimates or invoices for the work so that they can know the exact value of the work being done on the home rather than guessing on their own. The more forthcoming a homeowner is, the more accurate the appraisal will be.
Deferring maintenance will also hurt a home appraisal. For example, if a small area in the home is letting water in and it is left untouched for a long period of time, that small issue can become a much bigger problem. The faster you can tackle problem areas in your home, the better off you will be.
9. What Increases Appraisal Value of a Home?
Clean up your yard
While front yards aren’t quite as common in Raleigh (considering there are mostly apartment complexes), those who do have the luxury of a front yard should spend some extra time cleaning up the outdoor area as much as possible. While spending excessive amounts of money on landscaping is not necessary, it is helpful to remove weeds and dead trees from the outdoor area as well as any items that are cluttering up the entryway or front porch.
Spruce up the home
If you are in the process of selling your home, or if your home is in contract, chances are that your home is in pretty good shape for the appraiser. You have most likely decluttered it as much as possible and have had it professionally cleaned during the home selling process. If you are getting an appraisal because you are refinancing your mortgage, it is still important to take the time to clean your home as much as possible prior to the appraisal. While dirty dishes and scattered laundry won’t necessarily take away from your home’s actual value, it won’t make a great impression on the appraiser, either.
Indicate property improvements
If you recently made significant improvements to your home, such as installing new kitchen appliances, renovating your bathroom, putting in new flooring, or any other improvements, be sure to let the appraiser know. On the flip side, do not feel the need to make costly renovations to your home, as upgrades don’t always translate into a higher appraisal value. Prior to beginning an upgrade process, speak with your real estate agent regarding renovations and discuss which upgrades may help increase your home’s value.
Key Takeaways on the Home Appraisal Process
The home appraisal is an extremely important and necessary step in the home buying, selling, or refinancing process. It’s also one way you can remove PMI from your home loan early. There are several ways to prepare for home appraisal day, and many of the steps needed to positively impact the home appraisal report are within the homeowner’s control. If it is possible to have your home professionally cleaned prior to the home appraisal, that could help make a positive impression on the appraiser. Beyond that, decluttering the home as much as possible and providing clear access to key areas of the home are important. If you have any questions regarding the home appraisal process, reach out to your real estate agent. Most real estate agents have been through the home appraisal process countless times and can provide important information on how to prepare for the process.
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