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What Hurts A Home Appraisal?

April 25, 2024 7-minute read

Author: Lauren Nowacki

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Whenever someone is getting a mortgage, an appraisal is typically required. Even though it seems like a mundane part of the mortgage process, it can be a source of stress if high expectations are met with low results. It could even prevent the sale of a home.

In this article we’ll discuss what a home appraisal is, and what hurts a home appraisal so much that it could put a home sale in jeopardy.

What Is A Home Appraisal?

A home appraisal is a process that involves a certified third-party appraiser reviewing the home and comparing it to other homes in the area to determine its fair market value. It’s typically required by the lender when someone is using a mortgage to purchase a home or refinance their current mortgage.

There aren’t many differences between the two types of appraisals – both are used to determine the home’s value. However, one big difference is that in an appraisal for a home sale, the buyer can’t attend. If it’s a refinance appraisal, the homeowner is allowed to attend, which can be to their advantage. If they attend the appraisal, they may be able to point out the work they’ve done, the new features they’ve added or the best parts of the home – which could help the appraiser determine a higher home value.

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Why Is The Appraisal Value Important?

Why do you want the appraiser to determine a higher value for the home? Because the lender bases your loan amount on the appraised value of the home, this ensures the lender and the home buyer are paying a fair price for the home. It also helps ensure the lender won’t face a total loss if the homeowner defaults on the loan.

Low Appraisal

Because of this, a low appraisal could derail a home sale or refinance. If the appraisal comes in lower than the sale price, the home buyer will not be able to borrow enough money to cover the price of the home. They’ll either have to pay the difference out of pocket or renegotiate with the seller to drop the price. In a refinance, a low appraisal may mean the homeowner doesn’t have enough equity to borrow against.

High Appraisal

On the other hand, a high appraisal can allow a buyer to borrow the money needed to purchase the home at the agreed-upon sale price. It can also increase the amount of equity a homeowner has, which could increase their cash-out refinance proceeds or could remove their private mortgage insurance (PMI).

Homeowners who receive a higher appraisal than expected should be wary of borrowing more money than they intended just because they can. There’s a risk of over-borrowing, which could lead to becoming underwater on their mortgage should home prices fall in the area. This can be especially risky if they’re getting a home equity loan or home equity line of credit (HELOC).

What Affects Home Appraisals?

The appraiser will be looking at your home’s features, age and condition, then compare it to other similar homes in the area and what they sell for. Because your home’s value is based on the value of similar homes in the area, the local market will have a big impact on your appraisal. If the market is hot, many homes will sell at much higher prices, meaning your home could appraise for higher.

Here are some other things that house appraisers look at that could affect the appraisal:

  • Location of home
  • Size of land
  • Number of bedrooms and bathrooms
  • Square footage
  • Year built
  • Curb appeal
  • Major systems and home appliances
  • Condition of home and systems

What Factors Negatively Affect Home Appraisals?

There are things that can hurt a house appraisal and cause your appraisal to come back lower than you may have expected. Of course, keep in mind that there are some factors, like the sales price of comparable homes in your area, that may be beyond your control. Staying on top of the market conditions in your area and knowing if your home has one of these common issues can at least help you avoid the shock and know what to expect when you have your appraisal done.

Unique Or Rural Homes

If you have a unique or rural home, there’s not much you can do to change that. The reason having a unique or rural home can be a problem is that it can be difficult to assign a value to unique houses or rural properties because of a lack of comparables. There are far fewer homes in rural areas, so it may be hard to find multiple homes that have sold in the area. And unique homes are called that for a reason – no other home is like it. So how do you find similar homes to compare it to?

When appraisers come across this issue, they may have other options, like looking for real estate comps in competitive neighborhoods, finding a fit between the top and bottom price inside the market or giving a range in value instead of an exact number. Of course, these estimates are less precise, which means the home could end up being undervalued.

Outdated Systems, Appliances and Interiors

Updating appliances or any major systems, like plumbing, electrical or HVAC, can be costly. If yours are outdated, it could affect the overall value of the home. If the interior hasn’t been changed for decades, it may not appeal to buyers, which can also cause the value to decrease.

Outdated features like these could also signal that the home has not been taken care of properly and more issues might lie beneath.

Structural And Other Construction Materials

Construction has changed over the years and builders have found new methods, technology and even materials that can make the home stronger, more energy-efficient and safer. Because of this, it could make your home more valuable.

Some homes, particularly older homes, were built with dated materials that are now seen as hazardous. This includes things like asbestos and lead-based paint. Even if the materials are safe, your home may not be as energy-efficient if it hasn’t been updated. This could also affect value. This is especially true for old windows and doors.

Roof tiles and siding that are outdated, worn out or damaged can be pricey to fix, so that could also be a major issue that can drive down value.

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What Can I Do To Prevent A Low Appraisal?

You won’t be able to change everything in your home before an appraisal and, remember, some things will simply be out of your control. However, there are some steps you can take to help prevent a low appraisal.

  • Do your own research. This should include the current market conditions and the sale price of similar homes in your area that have recently sold, which are referred to as comparables, or comps.
  • Provide proof of upgrades. If you’ve made upgrades to your home, show proof. Create a file that details all of these home improvements and includes sales receipts.
  • Inspect the interior and exterior of the home. This should include your major systems and appliances and note any areas of concern. If something needs to be repaired or updated, get that done before the appraisal.
  • Improve your curb appeal. It’s the first thing the appraiser will see when they arrive at your home, so start off on the right foot. It can also indicate that you’ve maintained the rest of the home as well, so if your exterior looks a little ragged, make sure you clean it up.
  • Make sure your decor and home improvements aren’t too personalized. You’ll want a potential buyer to be able to picture themselves in the home and the appraiser will know when they’re unable to do that.
  • Clean up messes and clutter. A clean home that’s free of clutter makes rooms look bigger and more spacious, allows the appraiser to better view the features of your home and shows that you take care of the home.

If you have concerns about this, talk to your real estate agent and see if there’s anything else you or they can do to prevent a low appraisal.

FAQs: What Hurts A Home Appraisal?

Here are a few commonly asked questions regarding what hurts a home appraisal.

Will appraisers check the appliances in my home?

Appraisers will be checking appliances in the home since having outdated appliances could negatively impact the value of the home. Outdated appliances that might not run properly can be an issue for potential buyers – further signaling the importance of taking care of these various appliances as a seller.

Does a messy house affect a home appraisal?

A professional is trained to look beyond any clutter in the home to assess the true property value. Although a messy house does not affect the appraisal, it’s still a good idea to tidy up any clothing, toys or other personal belongings that could be in their way.

Do appraisers take pictures?

A home appraiser will typically take pictures of each room in your house. This helps them provide a visual of the property being appraised for lenders and buyers to have a better understanding of each room’s condition and features while reading the report.

What can negatively impact my home appraisal?

There are many things that can hurt a home appraisal, such as owning a unique home and having outdated appliances, home systems and other structural issues. Anything in a home that is old, outdated or not functioning properly can directly impact the home appraisal and the overall value of the home.

The Bottom Line

Appraisals help ensure you’re paying a fair price for a home and help prevent you from owing more on your loan than the home is worth. Appraisals also help a lender determine how much money they can loan you for your purchase or refinance. That’s why you want to do all you can to pay attention to the many things that can hurt your home appraisal. Taking certain steps to prepare for a successful appraisal can help all parties involved, whether you’re the buyer or seller, lender or borrower.

Once you’re ready, apply for a mortgage or a refinance today with Rocket Mortgage®.

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Lauren Nowacki

Lauren is a Content Editor specializing in personal finance and the mortgage industry. Her writing focuses on reporting the best places to live in the U.S. based on certain interests and lifestyles. She has a B.A. in Communications from Alma College and has worked as a writer and editor for various publications in Philadelphia, Chicago and Metro Detroit.