Refinance appraisal checklist: 7 ways to prepare

You'll need a home appraisal if you're refinancing your mortgage. The appraisal determines your home's fair market value, while an assessment usually refers to determining your home's value for property taxes. You'll want to prepare for the appraisal to get the best result. Learn more about how a home appraisal for refinance works and how to prepare your home.

Key takeaways:

• A refinance appraisal determines your home’s market value and confirms your home meets your lender and loan requirements.
• A licensed appraiser evaluates your home value to ensure you’re not borrowing more than your home is worth.
• Not all refinances require an appraisal, and you may qualify for an appraisal waiver.

What is a refinance appraisal?

A refinance appraisal is a professional evaluation of your home's fair market value. The results allow your lender to verify that your home meets loan requirements and is worth enough to justify the loan.

Why are appraisals important when refinancing?

Most lenders require appraisals when you refinance your mortgage to get an accurate idea of your home’s value and verify that you’re not borrowing more than your home is worth. The assessment helps protect the lender's investment and prevents you from taking on more debt than the home’s value.

Here are some key terms to help you understand the refinance appraisal process:

• Equity. The difference between your current home value and your remaining mortgage balance.
• Home value. The estimated price your property would sell for on the open market.
• Government-backed loans. Mortgages insured by the federal government, such as FHA and VA loans.¹
• Collateral. An asset that a lender accepts as security for the loan. This is typically your house.
• Loan-to-value (LTV) ratio. Lenders use this measurement to compare the amount you want to borrow against the appraised value of the property.

Certain situations change how home appraisals are conducted. For example, government-backed loans usually have stricter appraisal requirements as the property must meet specific health and safety standards. Depending on your loan type and how much equity you have, you may be eligible for an appraisal waiver.

What do appraisers look for in a refinance appraisal?

During your house assessment for refinance, home appraisers will look for the following:

• The home's condition. Appraisers assess the structural soundness, including the condition of the foundation, roof, HVAC system, and any obvious signs of wear or damage.
• The home's size and layout. The appraiser focuses on whether the listed square footage is accurate and on the home's functional floor plan.
• The home's location and comparable sales of nearby properties. The appraiser reviews public records and recent sales of comparable residences, also called comps. Your location and neighborhood heavily influence property values, so comps help appraisers gauge market trends and determine a fair estimate.
• The home's amenities. The appraiser will document interior features such as built-in cabinetry and permanently attached items, such as ceiling fans and custom tile, as well as curb appeal elements such as landscaping and exterior paint.
• Internal and external improvements. The appraiser will look at recent upgrades, built-in smart-home features, energy-efficient windows, and high-end fixtures, along with the quality of finishes.

7 steps to preparing for a refinance appraisal

Here are 7 steps you can take to make your home appraisal ready.

1. Improve your curb appeal

• Curb appeal is how attractive your home looks from the street. Some ways to improve it include:
• Power washing exteriors, walkways, and driveways
• Pulling weeds and adding fresh mulch
• Decorating porches or patios with outdoor seating
• Painting the front door a fresh color
• Cleaning your gutters
• Updating broken or outdated exterior light fixtures
• Replacing old, rusted house numbers

2. Declutter and deep clean

The more clutter your home has, the harder it is for an appraiser to accurately assess its condition. Clutter can hide improvements or renovations you’ve made or make the home feel smaller than it is.

You also can deep-clean your home a few days before the appraisal. This can highlight key features. On the day of the appraisal, do a final check to ensure your rooms are neat and clutter is put away.

“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 Joshua Walitt, a compliance and valuation consultant who is a certified appraiser in Grand Junction, Colorado.

3. Create a list of upgrades and improvements

Certain upgrades and home improvements can increase your home's overall value. Collect receipts, contractor invoices, and, if applicable, zoning permits. This helps your appraiser know where to look when they consider renovations and upgrades.

Keep in mind that home appraisers only consider permanent upgrades that you've made to your house. These updates are often referred to as real estate fixtures and can affect your appraised value.

4. Research comparable homes

As mentioned above, comps are recently sold homes in your area that are similar in size, age, features, and layout. Researching comps helps you set realistic expectations for your home's value. You can look up recent home sales on real estate websites or ask a real estate agent to provide a comparative market analysis to see what similar homes are selling for.

5. Make sure everything works

Your appraiser won’t test every power switch and outlet, but you should ensure that all your home’s major systems – including plumbing and HVAC – are functional. If you notice something doesn’t work, make sure to schedule repairs before your appraisal.

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

• Run your heating and cooling systems. How long does it take 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 your home’s windows. Look for cracks and warping near your window bases and ensure the windows lock and unlock properly.
• 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 faucets and the kitchen sink, that bathtubs drain efficiently, and that toilets flush completely.

6. Invest in small, cost-effective upgrades

Small upgrades can make a big difference in your home’s overall appearance. Choose budget-friendly, high-impact fixes that address obvious wear and tear without a massive remodel. You can determine what to prioritize by using previous appraisal and inspection reports. Replacing worn items is a great step toward building equity.

7. Do some last-minute preparations

On the day of your appraisal, there are some things you can do to ensure a smooth process. You’re allowed to attend the appraisal, which is one of the main differences between a refinance and a purchase appraisal.

Here are some things to help prepare for the appraisal day:

• 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 any kids or pets to be with a family member or friend on the appraisal date. If you can’t arrange for a sitter, ensure that your pets are in their carriers or crates and are calm and quiet.
• Write down a few notes for reference. Ensure your appraiser notes all your home's best features. 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. This can prevent any surprises you might have missed during your earlier cleaning.
• Set your thermostat to a comfortable temperature. Keeping your thermostat at a mild temperature can help the appraiser 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 and turning on any indoor lights.

FAQ

Now that you have a refinance appraisal checklist, let’s review some frequently asked questions about the process.

How is a refinance appraisal different from a home inspection?

A home appraisal is an independent determination of your home’s current market value conducted by a licensed appraiser. A home inspection is performed by a licensed home inspector who evaluates your property’s condition for major damage and safety concerns. The difference between home appraisals and inspections is that the former influences whether a lender approves your loan, while the latter helps you understand more about the home’s condition. It's also important to compare appraisal vs. assessment, as the latter usually refers to the taxable value of your home for determining property taxes.

How much does a refinance appraisal cost?

A refinance appraisal can range from $300 – $1,000 but varies based on factors like your location and property type. The appraisal fee is typically paid out of pocket or included in refinancing costs.

What happens after the refinance appraisal?

The appraiser will compile their findings into an official report and send it to the lender. The lender’s underwriting team reviews the report to verify that the home’s appraised value supports the requested loan amount and terms. If it does, your refinance is approved, and you’ll proceed to closing.

What happens if the appraisal is low?

If the appraisal comes back lower than the loan amount, you have a few options. You can challenge the valuation by providing new comps, work with your lender to reduce your loan amount, or make up the difference in cash.

What hurts the refinance appraisal value?

Factors such as deferred maintenance, unappealing exterior conditions, and outdated systems, such as HVAC, can reduce your home's appraised value. Influences out of your control, such as nearby foreclosures or declining neighborhood property values, can also reduce the appraisal value.

Will I always need an appraisal when I refinance?

Most loans will require an appraisal when you refinance. It depends on your lender, loan type, and the amount of equity you've built. You may qualify for an appraisal waiver, or an automated valuation model (AVM),² or existing data could be used to verify your home's worth. You also may qualify for a desktop appraisal. Your lender will inform you if you need an appraisal when refinancing.

The bottom line: Prep properly for that appraisal

Preparing your home for a refinance appraisal gives you the best chance of receiving an accurate or higher value. By boosting your curb appeal, making small repairs, and keeping a detailed list of home improvements, you take control of the factors within your reach and set yourself up for success.

If you're ready to explore your refinancing options with Rocket Mortgage, you can apply online.

¹ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

² Automated valuation model (AVM) is software that uses existing property details to generate a property’s estimated value. AVM appraisals are valid only for Home Equity Loan products. Not eligible for loan amounts greater than $400,000. When eligible for an AVM, the valuation will automatically be applied. Traditional appraisals available by request. Not eligible for loans already in process. AVMs are not available in all states or on higher-priced mortgage loans that don't meet Qualified Mortgage (QM) requirements. Additional restrictions/exclusions may apply. This is not a commitment to lend.