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What is a Home Appraisal?

What is a home appraisal?

Buying a home is an exciting, scrapbook-worthy event, so of course it’s going to come with a lot of emotions. But there’s one step in the process where objectivity and rationality take center stage, and that’s the home appraisal.

It may seem harsh to let a stranger take a few laps around your home and boil your beloved abode down to a single number, but it’s actually good to have this unbiased, emotion-free step in the process.

Because the house itself is collateral in a mortgage, the bank or lender needs to make sure there’s enough value in the house to recoup the investment if the buyer can’t pay back the mortgage.

Basically, the home appraisal is a way of protecting the bank from over investing in a property, which gives the bank the confidence to give the buyers their mortgage, which means the owner gets to sell the house!

So let’s dive into the home appraisal – what it is, what it involves, and how to make it work for you.

The home appraisal is a professional, unbiased assessment of the value of a property (also called the true or fair market value). It’s one of the preliminary steps in the closing process.

Home appraisals are almost always used in home purchases (unless the purchaser is an all-cash buyer) and commonly used in mortgage refinancing.

After the seller accepts an offer, the bank giving the potential buyers their mortgage will order an appraisal, which the buyers must pay for.

An appraiser must be certified and licensed to practice in the state where the property is located. They should also be familiar with the property’s surrounding town or neighborhood, because, as we’ll explain later, the area around the house is a factor in the appraisal.

Another important qualification for an appraiser is impartiality. It is prohibited for an appraiser to have a direct or indirect interest in the transaction for the property being appraised. Since the lender orders the appraisal, it is responsible for finding a qualified appraiser.

How to prepare for a home appraisal.

Just like anything else in life, there are some aspects of the home appraisal you can control, and some you can’t. One thing you can control as a seller is how prepared you feel on the day the appraiser shows up. Here are some things you can do to be ready.

First, you can order your own appraisal before you even put your house on the market. You’ll have to pay for it, but if you think it’s worth it to identify potential issues or just have an idea of what the value will be, go for it! You may come away with a list of repairs that can really increase your next home appraisal. At the very least, you’ll feel informed and armed with information when you start the closing process and the buyer’s bank orders its own appraisal.

The second thing you can do to prepare for a home appraisal is work with your Realtor® to review comparable sales in your neighborhood. These comparable sales, or comps, will factor into your appraisal value big-time, so you want to know what you’re working with. Your Realtor can provide you with comps as well as review and interpret the information with you. As you’re looking at comps, pay more attention to actual sale prices than list prices. The sale prices tell you more about the current values of the properties in your area.

The third thing you want to do ahead of your appraisal is go around your home, inside and out, and make sure everything is in working order. Check your smoke alarms, replace burned out bulbs, and repair anything that’s cracked or visibly broken.

Finally, if you ordered your own appraisal and came up with a list of repairs, or if you know you need to do some major repairs to improve your home value, get those done before the appraisal. Make sure you itemize every repair and improvement, keep receipts, and take before and after photos.

What does an appraiser look at?

There are a few factors that come together to form the overall appraisal, and they cover a lot of territory, including the home’s interior, exterior, number of bedrooms and bathrooms, square footage, overall condition, comparable home values and current market trends in your area, floor plan functionality, structure, age, location of your lot, condition of the roof and foundation, construction quality and code compliance.

The appraiser will perform a complete inspection of the exterior and interior of your home, but unlike an inspection, he or she will not test the functionality of things like your heating and air conditioning systems or your chimney.

The appraisal report should be available less than one week after the appraiser’s visit. The report generally includes the appraiser’s explanation of how he or she arrived at the value in the report, any problems that had a detrimental effect on the value, statements about the neighborhood or area that contributed to the value assessment, a description of market trends that may have affected the value, plus relevant sketches, photographs, and maps.

How much does it cost to get your home appraised?

Unless you ordered an appraisal for your own home, the potential buyer pays for the appraisal after it has been ordered by the lender. Appraisals are several hundred dollars, with most single-family appraisals costing between $300 and $500.

How to get the highest appraisal on your home.

Now let’s switch from the negative to the positive. How can you get the highest possible appraisal value on your home?

First, as we mentioned earlier, make sure you’re prepared. Order your own appraisal if you’re very concerned. Review comps with your Realtor. Repair large and small issues and itemize all of your improvements, including before and after photos of major repairs or updates, and receipts for everything.

Take the time before the appraisal to address repairs and improvements inside and outside that you think the appraiser will note. Here are some relatively simple and budget-friendly improvements and tasks to increase your odds of getting an appraisal that makes you happy:

  • Replace or shampoo old or stained carpet.
  • Update outdated or cracked tile.
  • Replace or repair outdated or broken windows.
  • Treat cracks, peeling paint, and stained walls with spackle and a fresh coat of paint in a neutral, up-to-date color.
  • Identify persistent odors and eliminate them.
  • Look for evidence of pests and deal with them.
  • Declutter the inside and outside of your home.
  • Get advice from professional home stagers who are experts at preparing homes for showings and open houses. They might have some easy tips that can make a big difference in the overall look and feel of your home’s interior.
  • While it’s not necessary to completely re-do your landscaping, it is helpful to remove dead shrubs, clear out weeds, and deal with dead grass patches.
  • Make sure your mailbox and your house numbers are in good shape.
  • Trim existing trees and shrubs.
  • Seal your driveway if it’s an eyesore.
  • Repair walkways and outdoor railings.
  • Power wash your home’s exterior if needed.
  • Replace your front door mat.
  • Clear cobwebs away from your front door and give it a new coat of paint if it looks shabby or washed out.
  • Clean all gutters.
  • Clean your windows on the inside and outside.
  • Update bathroom and kitchen fixtures.
  • Fix leaky faucets.
  • Clean fireplace exterior.
  • Update switch plates, knobs, handles and drawer pulls if they’re aging your home.

This is a long list, so use the “if it’s not broken, don’t fix it” rule of thumb and put your resources into those jobs that your appraiser will notice. This isn’t the time to do extra things that have been on your list for awhile—especially if you’re hoping to move out soon!

What can you do during the appraisal? It’s okay to be home during the appraiser’s visit, but don’t follow him around and don’t ask a lot of questions. Make sure the appraiser is comfortable throughout his visit. This means keeping pets away and quiet, and keeping the temperature moderate inside.

While the appraiser is in your home, you can tell him about improvements and unique qualities that may not be obvious. Feel free to share your before and after photos and receipts at this point. Also feel free to “sell” your neighborhood, telling the appraiser about any local improvements and special amenities available to people in your area. If you have a new roof or new insulation, alert your appraiser, since he or she may not be able to tell by looking at it.

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