Refinance appraisal checklist: 7 ways to prepare

Excited about refinancing your mortgage and hopefully lowering your monthly payments? You’ve been through this process before when you first took out your home loan. Many of the steps involved are similar, including the need to have your home appraised. But it’s natural to wonder: What do appraisers look for in a refinance? And what strategies can I follow to improve my odds of a more favorable refinance appraisal?

Trust in this article to provide helpful answers to these and other questions, along with valuable tips and insights from experts.

What is a refinance appraisal?

A refinance appraisal is a review of your home’s value by a licensed, third-party appraiser. This helps ensure that your home’s worth supports the mortgage refinance. A refinance appraisal works much like the purchase appraisal you received when you bought your home. It offers a professional estimate of your property's current market value, which is essential for securing a refinance of any type of mortgage loan, including government loans. This valuation also helps lenders calculate how much of your home equity you’re eligible to tap into if you desire a cash-out refi.

The appraisal consists of a visual inspection of your property’s condition, a measurement of your home’s gross living area, and a review of recent comparable sales in your area. The appraiser summarizes these findings in a formal report and submits it to your lender.

“The appraisal helps the mortgage underwriter make a lending decision, but it can also reassure the borrower that they are not ‘underwater’ on their mortgage – meaning they won’t owe more than what their house is worth,” says Joshua Walitt, a compliance and valuation consultant who is a certified real estate appraiser.

Why are appraisals important when refinancing?

Before we recommend ways to ensure a successful refinance appraisal, it’s essential to understand the role appraisals play in a mortgage refinance.

Most lenders require appraisals when you refinance to get an accurate idea of your home’s value and make sure you’re not borrowing more than your home is worth.

“Mortgages are secured loans, meaning that your home serves as collateral. If you fail to repay your loan, the lender could take your home in compensation,” says Martin Orefice, CEO of Rent To Own Labs. “Because of this, lenders will only let you borrow the amount of money that the value of your home supports. So they need to know what price it would fetch on the open market.”

Property values and home equity can change over time due to market fluctuations or even renovations you make on your own. That’s why a new appraisal will likely be required every time you take out a new loan on your home.

However, if you have a loan from the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA), your lender may allow you to refinance without an appraisal.

What do appraisers look for in a refinance?

It’s normal to wonder: Exactly what do home appraisers look for when refinancing? They’re generally seeking to evaluate your home’s overall value as well as:

• Its condition. “Appraisers look at the structural soundness, including the addition of the foundation, roof, HVAC system, and any obvious evidence of wear or damage,” says Dennis Shirshikov, a professor of economics and finance at City University of New York/Queens College.
• Its size and layout. “The appraiser focuses on whether the listed square footage is accurate as well as the home’s functional floor plan,” says real estate agent and investor Jacob Naig.
• Its location and comparable properties. The appraiser will consider more than just your home itself. They will also review public records and recent sales of comparable residences in your neighborhood. Since location heavily influences property value, these nearby sales – or "comps" – help appraisers gauge market trends and establish a fair estimate.
• Its amenities. “The appraiser will document interior features like built-in cabinetry and permanently attached items like ceiling fans and custom tile, as well as curb appeal elements like landscaping and exterior paint,” Shirshikov says.
• Any internal and external improvements you’ve made. “The appraiser will look at recent upgrades, built-in smart-home features, energy-efficient windows or high-end fixtures, along with things like the quality of finishes,” Naig says.

7 tips for getting a high appraisal for a refinance

Truth is, there’s not much you can do to impact appraisal factors like size, location, and comparable sales. But there are some steps you can take to ensure your home is ready.

Here are a few proven tips to help you prepare for a home appraisal. Keep in mind, these tips work best for in-person or drive-by (exterior-only) appraisals, but they likely won’t benefit you if it’s a desktop appraisal.

1. Improve your curb appeal

You might not spend much time thinking about your home’s curb appeal, considering how much time you spend inside. However, curb appeal can significantly increase or hurt your appraisal value, depending on the choices you make for your home’s appearance.

Before the appraisal process begins, take some time to spiff up your home’s exterior. That means mowing the lawn, power-washing your exteriors, and adding some easy-to-plant flowers outside your home, for example.

“A nicely groomed lawn, fresh mulch, and a clean front entry indicate your house has been cared for, and this can mean higher perceived value,” says Naig.

You could even add some decorative touches to your front porch or back patio if you believe they will add to your home’s appeal.

2. Do some decluttering

Clutter isn’t just annoying – it can cost you money. A messy house makes it harder for your appraiser to get an accurate feel for your home’s condition. It can make your rooms feel smaller and can hide improvements or renovations that you add to your home.

“Removing excess furniture or personal items has the effect of making spaces appear larger and better maintained. I’ve seen a midcentury bungalow valued 5% higher simply because the homeowner temporarily stored some of their furnishings remotely,” says Shirshikov.

You’ll also want to make sure that you give your home a deep cleaning a few days before your appraisal to reduce untidiness. Check to see that everything is neat, put away, and in its place before your appraiser arrives.

“Decluttering does not, in and of itself, directly increase the value of your house. But in some cases, it might help the appraiser collect more accurate details about the house and reduce corrections later on,” says Walitt.

3. Create a list of upgrades and improvements

Upgrades and home improvements increase the overall value of your home. So make things a bit easier for your appraiser by gathering proof of all the work you’ve done on the house since you moved in.

“Having a list of upgrades and improvements is a great way to let appraisers know about updates that may not be obvious, like new windows or additional insulation,” adds Orefice.

Did you add a central cooling system? Replace the windows? Add a privacy fence to your backyard? Collect all the sales receipts, paid contractor invoices, and, if applicable, zoning permits. This helps your appraiser know where to look when they consider your renovations and upgrades.

Real estate fixtures

Keep in mind that home appraisers will only consider permanent upgrades – sometimes known as real estate fixtures – you’ve made to your home when determining your appraised value.

“Real estate fixtures are elements that are bolted down and/or attached to your property itself – such as built-in bookcases, custom lighting, and window treatments,” Naig says.

Generally, 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, but making your home look nice and feel larger can subconsciously impact your appraiser’s assessment.

4. Research comparables

Comparables – or “comps” – are homes in your area that are similar to yours. Usually, comps will have:

• The same number of bedrooms and bathrooms as your home
• A location similar to your home
• An overall square footage similar to your home
• An age similar to your home
• A similar type of home

Research comparables to help you get a better idea of what your home is worth and if you can expect a favorable appraisal outcome. You can also use this information to contest your appraisal if the final number comes back lower than expected.

Visit your local county office or website to find out which properties have sold in the last 6 months. You can also use online real estate databases to compare properties in your area or enlist a real estate agent who can perform a comparative market analysis. Compare properties that are like yours, and make a note of their final selling prices.

5. Make sure everything works

Your appraiser won’t walk around your home testing every power switch and outlet. But you should ensure that all of your home’s major systems – including plumbing and HVAC – are functional.

“Especially in older homes, make sure that certain features are still functional, including built-in amenities like a hot tub, central vacuum system, or dumb waiter,” Orefice says.

Walk through your home with this checklist and confirm that everything is working:

• Run 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. Open and close and then lock and unlock each window.
• Test your kitchen appliances. Run your dishwasher with dirty dishes and test that 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.
• Check your water and drains. Confirm that hot water flows from the appropriate faucets and kitchen sink, bathtubs drain efficiently, and toilets flush completely.

Schedule repairs before your appraisal if you notice that something doesn’t work.

6. Invest in small upgrades

You don’t have time and probably lack the resources to quickly add another room or install a patio in your backyard if the appraiser is due to arrive in a few weeks. However, there are plenty of small upgrades you can make to your property that can increase your overall home value and equity.

Use these affordable and quick ideas to get started:

• Replace your hardware. Handles on cabinets and drawers can become worn or stained over time. Replacing them is easy and adds plenty of instant aesthetic value.
• Remodel your ceiling. If you have an outdated popcorn ceiling, replace it with a new smooth ceiling so that your space looks more modern. This or other ceiling renovations typically score you a higher market value if you decide to sell.
• Add a kitchen backsplash. A kitchen backsplash is a fun and personal way to upgrade the appearance and vibe of your kitchen. If you don’t want to deal with grout or a heavy investment, consider peel-and-stick backsplash, which can at least add a fresher sheen to your kitchen.

“Your focus here should be on replacing anything especially old,” says Orefice. “For example, upgrading your two-pronged outlets with grounded ones – potentially with GFCI switches or USB ports – is a good example, as is replacing your leaky faucet with a new one.”

Got a little more time on your hands? Consider more intensive renovations like adding hardscaping elements to your yard or replacing old appliances. If you’re planning to refinance in the next 6 months to a year, you should review past appraisal reports and address any problems that lowered the value of your home.

Just be sure these renovations will be completed 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, do everything you can to help the appraisal go smoothly. The good news is you are allowed to attend your own appraisal, which is one of the main differences between a refinance and a purchase appraisal.

Here are some things you can do a few days before and on the big day to maximize your home’s value.

• Request the day off work. Check your schedule and ensure you can be home for your appraisal. Ask your spouse or a trusted family member to help guide the appraiser if you can’t get the day off.
• Make plans for your children and pets. Arrange for the kids and pets to be away with a family member or friend on the appraisal date. If you cannot arrange for a sitter, ensure that your pets are in their carriers or crates and are calm and quiet.
• Write down a few notes to jog your memory. Make certain that your appraiser observes all of your home’s best attributes. Make a short list of your home’s most charming characteristics and keep this list with you to point them out when the day arrives.
• Do some light cleaning. On the morning of your appraisal, do a final cleaning and decluttering run. This will safeguard against any surprises you might have missed during your earlier cleaning.
• Set your thermostat to a comfortable temperature. You want a comfortable temperature on appraisal day so that the appraiser won’t be too hot or too cold. This can help the professional subconsciously associate your home with comfort.

“Ensuring a comfortable atmosphere can counteract subconscious appraisal bias and help cement your property’s appeal,” adds Shirshikov, who also recommends drawing your curtains to bring in natural light, turning on any inside lights, and leaving out a plate of freshly baked cookies.

FAQ

How is a refinance appraisal different from a home inspection?

Although both are related to property value, a refinance appraisal is different from a home inspection. The former determines the value of a property for lending purposes, and the latter is done to determine safety, code compliance, and the possibility of costly repairs. A professional home inspector will deliver a detailed report on all subsystems, from electrical panels to roof flashings, but they will indicate no dollar value of the property. Inspectors closely examine and test systems, appliances, fixtures, and materials, whereas appraisers observe only what can be seen and conditions that might have an impact on the market value of your home.

How much does a refinance appraisal cost?

The cost involved with a refinance appraisal can vary depending on your location, home size, and other factors, but the typical charge is between $300 and $600, with the average cost being $358, according to Angi.

What happens after the refinance appraisal?

After the refinance appraisal is completed, the appraiser will send their report to the lender (you will also get a copy). The lender’s underwriting team will check your home’s value against the loan terms. If the appraisal supports your desired loan-to-value ratio, the refinance will be approved, and a closing date will soon be set. If the appraisal comes in low, you can try negotiating the price of your loan, adding more equity, or challenging the valuation with additional data, including comparable sales or proof of recent improvements.

What hurts the refinance appraisal value?

Factors that can lower your appraised value include deferred maintenance like wear and tear and non-functional items, lack of needed home updates, excessive home personalization, being in an undesirable location, lack of comparable sales nearby, and local market conditions such as nearby construction and foreclosures.

Will I always need an appraisal when I refinance?

Not necessarily. An appraisal may or may not be required, depending on your lender. Some lenders offer appraisal waiver programs – meaning they allow the borrower to skip the appraisal process and simply rely on factors like credit, equity, previous value data, or other factors. If you are refinancing with the lender you already have a mortgage with, especially if you have plenty of home equity and are not looking to borrow extra money, they may waive the appraisal requirement.

The bottom line: Prep properly for that appraisal

It pays to prepare your home for the best possible refinance appraisal. Check that your home’s appliances and systems work and that its exterior looks attractive. Invest in a few small upgrades, do some decluttering, and make plans for your children and pets to be elsewhere before the appraisal.

Lastly, research comparable properties and create a list of everything you’ve improved in your home for your appraiser. All these factors working in conjunction can help improve your final appraisal value.

Ready to refinance? You can determine your home’s refinancing potential and what options are available to you when you start an application online with Rocket Mortgage^® today.