Appraisals are a crucial component of a home purchase or sale that assures a lender that the property they’re extending credit against is worth it. It’s the difference between getting your home through its condition of financing, or it could be the only roadblock to borrowing funds against the equity you’ve built in your home.
Generally, lenders won’t allow someone borrow more than 80% of a home’s value without mortgage insurance. If the appraisal comes in low, that could mean the deal just isn’t possible. How can you avoid a low home appraisal? Here are five tips.
1. Have an appraisal performed independently
To get a good idea what your home will be valued at, hire an appraiser on your own. It will cost you $300 or so to have an official appraisal performed on your property, but the value it provides is incomparable.
When an independent appraisal is performed, it gives you the opportunity to speak with the appraiser and review any factors that can increase the value.
Perhaps new shingles have been installed and the kitchen upgrades are of above-average finishing. By mentioning these things to an appraiser, it can provide insight to add the correct dollar amount to the home appraisal, but don’t expect that they’ll go beyond what’s reasonable. After all, they’re licensed and certified and can be held liable for being negligent or falsifying a report.
2. Journal your upgrades
Most upgrades and renovations are visible, but it always helps to bring them to light. As you’re getting your home ready for the appraisal, collect pictures and receipts of any upgrades you’ve performed. An album of before-and-after images can be left out while the appraiser is onsite, giving them a chance to see the quality and extent of the work performed.
3. Identify comps on your own
A home appraisal includes a comparison to three to five homes that sold nearby within the past 12 months. A lot can change in a year: an economic depression, neighborhood revitalization, or a pandemic, for example. Prior to the appraisal, determine at least five properties nearby that have recently sold that are of comparable size, style, and finish to yours. Select some of the top prices, then leave those comps around for the appraiser when they perform their examination.
4. Have a realtor accompany the appraiser
For an appraisal during a real estate transaction, it’s permitted for the homeowner to speak with the appraiser, but it’s not always a good idea. A professional presence can often be a better plan, so having your realtor participate in the home appraisal process can work wonders.
The realtor can point out your upgrades, unique selling propositions, positive neighborhood qualities, and any other aspects that could result in a higher appraised value.
5. Show your home at its best
Although the appraiser isn’t looking for socks under the bed or a dirty toilet bowl, a generally clean home shows your property best. Keeping everything in good repair will certainly help as well.
Of course, an aging home is bound to have a few minor issues, but it’s a fine plan to correct as many flaws or damage spots prior to the appraisal. What’s most important is that you don’t cover up minor issues with shoddy workmanship. That can detract from your home’s appraisal rather than add to it.
If your home appraisal ends up at a lower value than you expect, you have options. You can appeal the appraisal if it’s grossly miscalculated, or switch lenders in the hopes that the new one will have a different appraiser. You can also add money to make the deal go through, or just wait until a better market or higher equity position.