Refinance Appraisals: Types Available And Ways To Prepare
Rachel Burris9-minute read
November 11, 2020
While some refinance loan options don’t require an appraisal, most do. For the majority, the appraisal is an important part of the refinance process. Appraisals assure lenders that they aren’t loaning you more money than your home is worth. This means that you want your appraisal to come back as high as possible. Thankfully, there are a few steps that you can take to improve your chances of a successful appraisal.
We’ll go over some basic information about the types of refinance appraisals available and the process used to perform them, before guiding you through seven ways to prepare for your appraisal.
Types Of Refinance Appraisals
Depending on your reason for refinancing and the amount of equity you’ve built in your home, your lender will order either a full appraisal or an exterior-only appraisal of your property. Although these two types of appraisals both provide a valuation of your house, they use slightly different processes to arrive at your home’s worth.
A full appraisal will require a home visit. The appraiser will conduct a thorough inspection of the home’s exterior and interior to judge the condition of the property and make note of its size and features. The appraiser will then run an analysis that determines the fair market value of the home by comparing it to similar homes that have sold in the area recently.
For an exterior-only appraisal, the appraiser does not enter the home. That being said, the appraiser may send someone to the home to take photographs to aid their valuation.
To conduct the exterior-only appraisal, the appraiser will inspect the home’s exterior, examine photographs of the interior, compare the location, size and condition of the home to comparable properties that have recently sold and consider any additional information that has a bearing on the current market.
Now that you know the basics, let’s take a look at the home appraisal process in a bit more detail to give you a better sense of what appraisers look for, especially when conducting a full appraisal.
The Home Appraisal Process
Appraisals are not performed by your mortgage company. Most state laws require that only an independent third party may perform an 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. 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 value of the home. 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 estimation of the value of the property in a formal report. The appraiser then delivers the report to your mortgage lender.
7 Ways To Prepare For A Refinance Appraisal
When you refinance, you want your home to be valued as high as possible. The best way to ensure a high valuation is to spend a bit of time prepping your home for the appraiser’s visit. Here are seven ways you can prepare for a refinance appraisal.
1. Improve Your Curb Appeal
You might not spend very much time thinking about your home’s curb appeal when you spend most of your time inside. However, curb appeal can significantly affect your appraisal value. Before your appraiser arrives, you may want to spend time improving your home’s exterior. Here are a few ideas to get started:
- Mow your lawn. It can be hard to tell when you need to mow your lawn. Take a look at your yard and mow your lawn when your grass is more than 3 inches long. Use sharp lawnmower blades to prevent tearing and to help keep your grass healthy. In the summer, leave your grass a bit longer so the seeds can shade the roots. This will help keep your lawn green and lush.
- Plant flowers strategically. Blooming flowers can be a massive asset when it comes to your property aesthetics. Research easy-to-plant flowers that are native to your local climate and plant them a few weeks before your appraisal. Remember to water and mulch your plants as often as necessary to keep them looking bright.
- Touch up patio accents. Curb appeal isn’t only about landscaping – anything you display in your front lawn will affect your overall home value. Take care of the furniture on your patio, as well as any seat cushions. Also, power wash your siding, walkways and fencing to maximize curb appeal.
2. Do Some Decluttering
Clutter isn’t just annoying – it can cost you money. Clutter makes it more difficult for your appraiser to get an accurate feel for the condition of your home. It can make your rooms feel smaller and can hide improvements or renovations that you’ve added to your home. Here are a few ways you can declutter in each of your home’s major rooms.
- Bedroom: Clothing causes the majority of clutter in most bedrooms. Make sure that all of your clothing has a defined “home,” be it in a closet, armoire or chest. Consider donating unworn items to a local charity or shelter.
- Kitchen: Clear clutter off of your countertops to make your kitchen look larger. Store appliances in cabinets and make sure dishes are clean and put away on the day of your appraisal. You may also want to consider touching up backsplashes, paint or wallpaper if needed.
- Living room: Living rooms often suffer from a lack of good lighting and proper use of the space. Rearrange your furniture and see which option makes the room look larger. Do you have too much furniture? Consider getting rid of a piece or two. Swap out old light bulbs for brighter choices and hang a mirror to give your living room the illusion of more space.
You’ll also want to make sure that you give your home a deep cleaning a few days before your appraisal to reduce clutter. Be sure that everything is neat, put away and in its place before your appraiser arrives. Making your home look nice and feel larger can subconsciously impact your appraiser’s assessment.
3. Create A File Detailing Your Improvements
Upgrades and improvements increase the overall value of your home. Make things a bit easier for your appraiser by compiling a file with proof of all the work you’ve done on the house since you moved in. Did you add a central cooling system? Replace the windows? Add a privacy fence to your backyard?
In your file, be sure to include sales receipts, paid contractor invoices and zoning permits if applicable. This will help your appraiser know where to look when they consider your upgrades.
Keep in mind that only permanent upgrades you’ve made to your home will count toward your appraisal value. As a general rule, if you can take something you’ve added along with you when you move out, it won’t count toward your appraisal. Purely aesthetic choices (like painting your living room walls) won’t add to your value either.
4. Research Comparables
Comparables are homes in your area that are similar to yours and have sold in the last 3 – 6 months. They usually have the same number of bedrooms and bathrooms as your home, are in a similar location and have a similar square footage.
Research comparables to help you get a better idea of what your home is worth and whether you can expect a good appraisal. You can also use this information to contest your appraisal if the final number comes back lower than expected.
Visit your local county offices and find out which properties sold in the last 6 months. Compare the properties that are like yours and make note of their final selling prices. You can also use online real estate databases to compare properties in your area.
5. Make Sure Everything Works
Your appraiser won’t walk around your home testing light switches and outlets, but you should make sure that all of your home’s major systems are functional. Go through your home with this checklist to make sure that everything is working.
- Run both your heating and cooling systems. Time how long it takes for your home to reach the requested temperature.
- Engage your home’s security system. Make sure that only the correct code arms and disarms the system.
- Open and close all of your home’s windows. Look for cracks and warping near your window bases. Lock and unlock each window.
- Test your kitchen appliances. Run your dishwasher with dirty dishes and make sure they come out clean. Heat up your oven and use the burners.
- Run your ceiling fans. Turn them on and off and pay attention to how long it takes for your fan to start and stop.
If you notice anything that isn’t working, schedule a repair before your appraisal.
6. Invest In Small Upgrades
You don’t have time to add another room or install a patio in your backyard if you have an appraiser coming to your home in a few weeks. However, there are plenty of small upgrades you can make to your home that can increase your overall home value. Use these affordable and quick ideas to get started:
- Replace your hardware. Handles on cabinets and drawers can become rusty or stained over time. Replacing them takes little more than an afternoon but can add tons of aesthetic value to your home.
- Remodel your ceiling. Is your home a relic of the ’80s? Chances are, you have a popcorn ceiling. You can add aesthetic value to your home by removing it and making your space look larger. Though removing a popcorn ceiling can get messy at times, it’s a relatively inexpensive renovation that can also score you a higher market value if you decide to sell your home.
- Add a kitchen backsplash. A kitchen backsplash is a fun and personal way to improve the look and feel of your kitchen. Got an appraiser coming in just a few days? You can use a peel and stick backsplash to add color without working with grout.
Consider more intensive renovations like adding in hardscaping or replacing old appliances if you have a little more time on your hands. However, be 100% positive that these renovations will finish before your appraisal. The last thing you want is for your home to be a construction zone on the day your appraiser arrives.
7. Do Some Last-Minute Preparations
On the day of your appraisal, you’ll want to do everything that you can to help your appraisal go smoothly. Here are some things you can do a few days before your appraisal and on the big day to maximize your home’s value.
- Ensure you have the day off work. Check your schedule and make sure you’ll be able to be home for your appraisal. Can’t get off that day? Appoint a spouse or trusted family member to help guide the appraiser.
- Make plans for children and pets. Children and pets can be a distraction. Arrange for children to be out with a family member or friend on the day of the appraisal or quietly playing in a bedroom or playroom. On the day of your appraisal, make sure that pets are in their carriers or crates.
- Write down a few notes to jog your memory. You’ll want to make sure that your appraiser sees all of your home’s best attributes. However, it’s normal to forget what you want to show them if you don’t write it down. Make a short list of your home’s most charming points and keep it on you when the day arrives.
- Do some light cleaning. Tidy up on the morning of your appraisal. Remove smelly garbage and wipe down your countertops. Put away books, clothing and anything else that’s out of place.
- Set your thermostat to a comfortable temperature. This can help your appraiser subconsciously associate your home with comfort. It also makes testing the heating and cooling systems a bit easier.
Prepare your home for the best possible refinance appraisal. Make sure that your home’s appliances and systems work and that your home’s exterior looks great. Invest in a few small upgrades, do some decluttering and make plans for children and pets before the appraisal. Finally, research comparable properties and create a list of everything you’ve improved in your home for your appraiser. All of these factors working in conjunction can help improve your final appraisal value.
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