An appraisal is an integral component of mortgage lending and can make or break a home sale transaction. A low appraisal value could end up derailing proceedings, keeping homeowners from closing on their home purchase or getting approval from lenders to refinance.
Your appraiser cannot control how he/she appraises your property; however, you can take some steps to help yourself. One essential strategy is being prepared by compiling a list of upgrades made and providing sales receipts as evidence of these purchases.
The Appraiser’s Process
An appraisal is an integral component of both home purchasing and refinancing processes, and should never be skipped over. Lenders use it to assess what loan amount they can offer you based on the current value of your property and to make sure you do not pay more than its true worth.
An appraiser can assess a property’s worth by comparing it with similar homes in its immediate area and conducting market research. They’ll consider factors like size, floor plan and any special amenities or features; condition including overall upkeep will also be taken into account and any water damage noted that could cause mold growth that decreases value of the home.
An appraiser will also take into account the neighborhood and surrounding area when appraising homes, noting whether they are close to desirable features like good schools, safe communities and retail or dining options. They’ll assess whether the home is situated near any undesirable elements like junkyards, power lines or busy streets that could compromise its value.
If you have made upgrades to your home, an appraiser will take those upgrades into consideration, provided they are permanent fixtures that increase its value. For instance, renovating the kitchen, finishing basement or landscaping around pool will all increase its worth among comparable properties in your area.
The Appraiser’s Physical Assessment
An appraisal involves conducting a complete physical inspection of your property. An appraiser will take measurements in each room in your home in order to assess square footage, inspect its roof, basement and attic as well as any repairs or upgrades done, number of bedrooms/bathrooms as well as whether or not there is a garage/attic space present.
Location and neighborhood can have an immense effect on the value of your home, with proximity to amenities, safety concerns and proximity to garbage dumps or power lines all having an effect on its worth.
Note that, unlike home inspectors, appraisers do not typically offer advice on how to solve problems that have been found during an inspection process. Nonetheless, keeping records of repairs or upgrades completed could boost your home’s value significantly.
Home appraisals are conducted when applying for a mortgage loan to purchase or refinance their current home, or refinancing existing debt. Mortgage lenders use home appraisals as an additional safeguard that they’re not lending more money than what’s estimated to be worth of the property they’re lending against.
The Appraiser’s Market Analysis
When estimating the value of your home, an appraiser will look at comparable homes that have recently sold or are on the market in your area, known as “comps.” Your location can also have an effect on its worth; particularly if it’s situated within an attractive neighborhood. Furthermore, its condition will play a part – for instance a poor roof could negatively affect its worth.
If you have made changes to your home, an appraiser will take note. For instance, installing new bathrooms or kitchens could increase its value; adding energy efficient appliances and green features such as solar power may increase its attractiveness as well.
Age can have a dramatic impact on the value of your home, with new construction often fetching higher values than older properties; though there may be exceptions.
An appraisal is generally necessary when applying for a mortgage, as it helps the lender ensure you’re purchasing property at a fair price and will make a profit when selling it later on. An appraisal may also be needed in divorce and estate settlement situations to establish fair market value of homes in dispute.
The Appraiser’s Final Report
Once an appraisal is complete, its findings will be submitted to their lender for review and any necessary modifications will be made to their loan amount. While the process may seem lengthy and tedious, its purpose is clear – only mortgage loans backed by actual value of properties should receive mortgage loans.
One of the key considerations when appraising your home’s value is its location. If it is situated in an undesirable neighborhood or close to power lines or junkyards, its value could take a hit. Furthermore, any improvements or renovations completed since you last appraised are also taken into account; adding central air conditioning might count as an upgrade and therefore be factored into its valuation; replacing an older air conditioner may not count as such an enhancement adding any real value to your property.
Water damage can have a dramatic impact on your home’s value. An appraiser will closely inspect any signs of wet basement or damp crawl space conditions as well as mold, mildew or rot in your home – especially dangerous and costly mold removal, therefore it is vital that any issues you find be corrected prior to an appraisal taking place.
