Your home equity line of credit (HELOC) is in the works or you’re waiting the bank’s approval for a new mortgage on the house you’ve agreed to buy. It’s an anxious time, and much of the process hinges on a home appraisal. Whether you get the financing or not can affect the coming years of your life.
What goes into the process of a home appraisal? What are appraisers looking for, and what can you do to positively impact the result? Here’s what you need to know.
What’s the purpose of a home appraisal?
When you’re applying to borrow money from a financial institution, that institution wants to know that the collateral you have will cover the debt you’re taking on. With a home, that means that the home is worth more than you’re borrowing. A home appraisal offers the lender an unbiased opinion that reflects the home’s value.
Not only is it a safeguard for the lender, but it is for the borrower too. It prevents you from making a purchasing decision that’s out of step with the true value of the home.
The appraisal process
Although you can hire an appraiser privately, an appraisal is typically ordered by the lender. This licensed and certified professional will arrange a time to inspect your home to set an appraised value. Once they’ve compiled a report, it’s provided to the lender to make a determination about funding your request to borrow money or establish a mortgage.
Who performs the appraisal?
An appraiser is someone who must be licensed in the state where they work. While not every appraiser has experience working a trade like plumbing, electrical, or carpentry, the majority have previous careers that assist them in being proficient.
To earn their certification, an appraiser must pass 75 hours of coursework to become an apprentice or trainee. An additional 75 hours of coursework must be completed to become a licensed residential appraiser. To achieve the status of certified residential appraiser, an additional 50 hours of relevant courses are necessary.
What home appraisers are looking for
In a home appraisal, there are several important factors that go into the home’s valuation. They include:
The home’s physical dimensions. That includes the total square footage, number or bedrooms and bathrooms, and lot size.
The dwelling’s age and condition. Newer homes in good repair are more desirable and command a higher selling price.
Deficiencies in the property. If you have a roof that needs replacement or a leaky hot water tank, that will take away from your appraised value.
The neighborhood and surroundings. The same home in a high-income neighborhood will be appraised higher than a home in a less desirable area, simply based on home buyers’ preferences. The same applies for road and air traffic.
How you can influence the appraisal process
Remember, the appraiser is trained to look for items and conditions that affect the home’s value, not if you’ve put away your laundry or washed your dishes. And you certainly shouldn’t try to leave cash out for the home appraiser to bribe a higher value.
There are a few things you can do to boost the appraisal, though.
Touch up minor flaws. Patch drywall cracks and paint scuffs to give the best impression possible.
Perform routine maintenance items. Fix the dripping tap and replace out-of-service appliances to command the highest valuation.
Make your home look good from the street. Mow your lawn, wash your windows, clean up the trash, and plant flowers in the garden for the best visage.
Don’t draw attention to defects. Sometimes a hole in the wall can be covered with a wall hanging or picture frame or a couch carefully positioned to cover up water stains.
If you feel the appraisal isn’t accurately reflecting your home’s value, you can challenge it with your lender. It might require a second appraisal or there may be adjustments possible with a lender’s review alone.