What Do House Appraisers Look For – Certified general real estate appraiser Gilbert Valdez of Coast Appraisal Network appraises a home in Fountain Valley, California, on October 31, 2012. Credit: JOSHUA SUDOCK | MCT
The home appraisal process can be one of the most nerve-wracking parts of selling a home. One independent party is appraising the fair market value of your home, and the appraiser’s conclusion can sink the deal. Banks will not approve the loan if the appraisal does not provide them with sufficient collateral.
What Do House Appraisers Look For
The primary factors in a home appraisal are current market trends related to the location and type of home, recent sales figures from comparable homes in the area – and, of course, the condition of the house. Appraisers will look for factors in several areas to assess condition.
What Is A Home Appraisal?
Exterior— Appraisers will assess the structural foundation of the home and the size and condition of the surrounding property. Checks include the integrity of the foundation and roof, any issues with siding, gutters or soffits, and evidence of leaks, cracks or water damage. Expansion capabilities with the property, or any potential issues such as flood prone spots or dead trees can be considered.
Interior — The home’s layout, total square footage, number of bedrooms and bathrooms, appliances, and the materials and condition of all interior surfaces will be evaluated . Any non-functional appliances, lighting, electrical outlets or plumbing fixtures will deduct from the appraisal value. If modifications have been made, the structural integrity of the load-bearing walls and beams is assessed.
Extras— Features that add to the value such as a pool or improvements made since the last appraisal will be incorporated into the value.
The final valuation report includes the basic information used by the valuer and explanations of the valuation results.
Here’s A List Of What Home Appraisers Look For
Appraisal costs, usually $300-$400, are typically paid by the borrower. However, a seller can also ask for his own appraisal, especially if he does not agree with the value of the initial appraisal.
Appraisers must be certified/licensed and must have familiarity with the area and the local real estate market. They must also have no conflict of interest in the transaction towards any party – lender, seller, or buyer.
However, relatively new rules prohibit lenders Fannie Mae and Freddie Mac from any direct contact with appraisers and there is an increase of third-party appraisal management companies (AMCs) to close the gap. AMCs are free to hire cheaper, potentially less qualified appraisers, so review your appraisal information carefully.
Sellers— A low appraisal may allow a buyer to back out if the contract was contingent on appraisal values, while a high appraisal value means you’re agreeing to sell the home for more than it’s worth. If the deal is threatened by the low appraisal, you can dispute the appraisal with the lender based on information that refutes the appraiser’s conclusion, or get your own appraisal — although this risks confirming the low appraisal, and the -value may not be accepted by the lender.
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Dig into the reason for the low valuation. If the comparable houses are not representative – and they may not be in a slow real estate market with few options nearby – you will have to look for yours that goes against those that have been used.
Meanwhile, to keep the assessment costs as high as possible, the sellers should take care of simple maintenance and keep the cleanliness and order in the house. The appraisal process is still subjective, and an appraiser cannot help his or her first impression of the home.
Buyers— Many buyers are turned off by a low appraisal and return even if they believe the appraisal was in error. Even if you’re not really overpaying, that low valuation stays on the record.
Other buyers will try to use the low estimate as a bargaining tool to convince the seller to lower the asking price. Failing that, your options are to make the difference of the valuation in cash at the time of purchase, or walk away from the deal. If both buyer and seller are willing to proceed and can handle the time frame, it may be preferable to switch to a new lender and start the process over.
What Do Appraisers Look For When Determining A Property’s Value?
Whenever the valuation goes up, celebrate. Assuming the seller honors the contract, this is an advantage to you of extra equity that you don’t have to pay for.
Refinancers— Since there is no buyer-seller relationship in a refinance, it’s just a matter of whether the bank approves your loan based on the appraisal value. Conventional loans are dependent on an appraisal that at least matches the amount you want to refinance, but the FHA streamlining program allows refinancing without an appraisal.
If there is reason to believe that the value of your home has increased, you can help yourself with an appraisal in several ways. A higher appraisal can get you a better interest rate because it gives you a better loan-to-value (LTV) ratio, and it can also help you avoid private mortgage insurance (PMI). You can do your own homework on compound homes and make your best guess about the valuation, but it’s probably wiser to ask a real estate agent for an opinion before proceeding with an appraisal.
Many deals depend on an accurate appraisal, so make sure you agree to the terms of the appraisal regardless of which side of the transaction you’re on. The home buying process is filled with so many small steps, it can be confusing at times. In particular, many home buyers and sellers can get confused when it comes to the difference between a home inspection versus a home appraisal. Home inspections are focused on any major problems and the condition of everything in the home, while home appraisals focus more on the curb appeal and value of the home.
What Appraisers Look At During A Real Estate Appraisal
Both the home inspection and the home appraisal play an important part in your home buying journey, so we’ve broken down the differences between them below so you can go into each with confidence .
A home inspection involves an inspector going through a list of items to make sure the home is in good condition before selling it. A home inspector will go over major components, such as an HVAC system, and minor details, such as how easily a door knob turns.
The buyer should be there during a home inspection so they can know in advance if there is anything wrong with the home. If you are the buyer, you are like what you want to hire a local home inspector, although you can try to negotiate this with the seller.
Sellers may also want to be present in case something goes wrong or the home inspector can’t reach a certain area. Be sure to arrange in advance so that the inspector has easy access to things like the basement, the electrical panel, and the attic.
What Do Home Appraisers Look For In A House?
An inspector will then look at smaller items such as loose soil and even faucet pressure if needed. It’s not uncommon to see dozens of small items, so don’t worry if you see a long list.
This decision will come down to a matter of negotiation. Any small problems such as a squeaky door or a torn screen will usually fall to the hands of the buyer. They may want to make specific changes to these items anyway, so there’s no need to waste money.
Major problems, such as a failing septic system or lead pipes, can fall to the seller. But this is a scenario by scenario basis.
A buyer can request that the problem be taken care of before they finalize the sale so it falls to the seller to take care of. Or a buyer can request that the cost of the repair be removed from the final price of the house.
How Appraisers Determine A Home’s Value
Home inspections typically last about three to four hours, depending on the square footage and ease of access to the areas. Therefore, large houses can take over the whole day, while small houses can only take an hour or two.
Most reports come in within 24 hours, but it can take up to a week if the home inspector finds several problems. You may also have to wait longer if your area is experiencing a surge in sales and the inspector is particularly busy.
A home appraisal focuses on things like curb appeal, the location of the home, and the functionality of the home to determine a fair price. Lenders require an appraisal before finalizing a mortgage to ensure that the financial institution is making a safe investment as well.
Because lenders require an appraisal, they either pay upfront fees when hiring a local property appraiser or factor it into their closing costs. Buyers and sellers don’t necessarily need to be present when an appraiser comes, since they aren’t looking at the smaller details like a home inspector would.
What Hurts A Home Appraisal? 21 Factors You Should Look Out For
A home appraiser will look at a large number of different items that affect the overall cost of the home. These items include:
A home appraiser may request a copy of the home inspection to look at the overall condition of the home. If there are major items such as a leaking roof, a broken HVAC system, or a failing electrical system, then
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