Does your seller wonder what happens during an appraisal? We’ve written this article as a resource for you and your client. We’ll cover what an appraisal is, how they can prepare, and what happens during the appraisal of their home. We’ll also provide a home appraisal checklist, discuss what hurts a home appraisal and go over the cost.
What is a Home Appraisal?
Home appraisals are thorough property inspections carried out by licensed professionals to assess the true worth of the property. The appraisal can be different than the listing price for the property. The appraiser compiles all their findings into a report to determine the home’s appraised value.
“If a buyer is financing their purchase with a loan, the lender will typically handle ordering the appraisal. This is done to ensure that the lender is not lending more money than the property is worth. As such, some lenders may require buyers to include an appraisal contingency in their offers,” says Heidi Knight on the Opendoor blog.
How Sellers Can Prepare for Home Appraisal
Finish minor repairs. If your seller has a To-Do list of minor repairs, now is the time to fix them. Since they don’t cost too much to repair, the seller can take initiative ahead of time and minimize the chance that those issues will downgrade your home’s condition.
Be aware of the $500 dollar rule. “Appraisers tend to value property in $500 increments. Because appraisals with $500 increments are common, it’s in your best interest to make small repairs if you are selling your home or refinancing. Even the smallest of changes can contribute to the overall condition of your property,” says the American Financing blog.
Maximize curb appeal. Curb appeal is one of the factors in determining home value. Generally, a home’s exterior usually matches its interior. If your seller can un-clog their gutters, pull weeds, and ensure that pathways to the home are well-lit, they will go a long way in making it more appealing. It can also help to add small touches to the exterior, such as doorway decor.
Think about upgrading, but don’t overdo it. Some homeowners fully remodel their kitchens in order to boost their home’s value, only to find they didn’t recoup the investment. Learn from those mistakes and advise them not to invest in anything major. They can, however, make some minor steps to upgrade. These upgrades can include adding a new coat of paint, replacing fixtures, and replacing dated bathroom vanities.
Keep track of improvements. Advise your seller to keep track of all improvements they make. The appraiser may not be familiar with homes in the seller’s neighborhood, and keeping a list of upgrades handy may help. If the seller has contractor invoices or other paperwork, they should be willing to provide it to the appraiser as well.
Clean the home. Appraisers are trained to look past a home’s cleanliness, but that doesn’t mean your seller wouldn’t benefit by having their home clean. Appraisals can be subjective, and the cleaner your home is, the better the home will do. “A clean home will usually rank much better in terms of overall condition than one the inspector perceives as dirty. Additionally, not cleaning your home increases the likelihood of pests and rodents. This is something a seller will consider,” the Opendoor blog states.
Cost of a Home Appraisal
“A home appraisal typically costs about $300 to $400, with a national average of $339, according to HomeAdvisor. But home appraisal quotes can start at $600 in some metropolitan areas, and fees can exceed $1,000 for larger or more complex properties,” says Barbara Marquand on the NerdWallet website.
Don’t fret: the buyers lender will pay for the appraisal! The buyer will reimburse the lender at closing.
What Happens During a Home Appraisal?
During a home appraisal, the licensed appraiser will conduct an inspection of the property. “The appraiser will consider all factors that could affect the property value. These factors include the condition of the property, upgrades or additions to the property, the size of the lot, and ‘comps’ or recently sold properties of comparable size and condition in the same market,” continued Heidi Knight on Opendoor.
What Happens During Appraisal Review?
After the home appraisal, the mortgage lender will review the information. This period of time is known as the appraisal review. “Every lender has its own appraisal review process. Some lenders are extremely lenient while others are more strict. Some will accept the appraisal, and there are others who will go over it with a fine-toothed comb. In the majority of cases, the appraisal review process is nothing but a formality,” says Gustan Cho on his GCA blog.
He goes on to state that sometimes a lender will lower the value of the actual appraisal during the appraisal review process. This can happen when “the appraiser cannot get comps that are nearby or comps that are equivalent to the subject property. If this is the case, the appraiser needs to go outside of the area and make positive or negative adjustments. In cases like these, the appraisal review underwriter may not agree with the value of the appraisal. The underwriter then comes up with his or her own market value.” Sometimes the underwriter will even order a second appraisal or a field review appraisal.
“It’s definitely not a super quick process, having your home appraised. But do you want it to be? Do you want your lender and appraiser to rush through the valuation of your largest investment? I don’t! A good appraisal should take time,” says Ryan Bays of Riverfront Appraisals in Kentucky. He gives a loose timeline of how long the appraisal process will take:
- The appraisal is ordered by the bank
- The appraiser calls to schedule the appointment (1-7 days later)
- The appraiser visits the home (1-7 days later)
- The appraiser submits the report (1-7 days later)
- The review process is complete and the report is submitted to the lender (1-7 days later)
Home Appraisal Checklist
If your sellers want a more in-depth home appraisal checklist than the words of advice we offered above, here’s a more detailed home appraisal checklist:
- Ensure that your home is well-landscaped and attractive from the street
- Repair damaged drywall or paint rooms
- Ensure that light switches, fans, wall outlets, and vents work properly
- Provide documentation of home improvements with prices and dates
- Provide copies of previous appraisals
- Ensure all rooms of the home are accessible
- Let the appraiser do the inspection without distraction
There are special requirements to be approved for FHA and USDA loans. They require that you adhere to HUD (Department of Housing and Urban Development) guidelines:
- Drainage must move away from the house, not toward it
- Handrails along any steps and stairways
- A strong foundation (that can withstand “all normal loads imposed on it”)
- Proper ventilation, fully functional mechanical systems
- A roof that keeps moisture from entering the home (Report a roof that needs to be replaced within two years)
- Lead-based paint (more common in homes built before 1978)
- Defective paint (chipping, peeling, flaking paint)
- Evidence of termites
If you’re approved for a VA loan, you must work with a VA licensed appraiser and the VA will assign them instead of the lender. Your report must be reviewed by a VA staff appraisal or a lender’s staff appraisal reviewer.
“The staff appraisal reviewer is generally expected to issue the Notice of Value within five business days. It’s important to understand that you may only borrow the NOV amount. If you’re looking to buy a home for $275,000 but the NOV came in at $270,000, you would only be able to borrow that amount. The seller would have to agree to the new amount or you’d have to come up with the $5,000 in cash,” advises the American Financing blog.
How to Find Home Appraisal Near You
Looking to find a home appraiser near you? Though lenders typically choose home appraisers to ensure it’s not biased in the buyer’s favor, you may want to know where to find home appraisers.
There are several websites that make it easy to find a home appraiser near you, including:
Just type “appraise real estate” into the search bar and add your project’s zip code on the next screen. Select the purpose of the appraisal and its estimated size. Select if you’re the property owner, lender, or other. Write what kind of timing you need and the type of location. Describe the project, enter the address and your name.
This site is much like HomeAdvisor. Simply follow the steps above to get information.
- The National Association of Realtors (NAR) has a page where you can look for an appraiser. Just type all the pertinent information into the online form.
With Yelp, it’s super easy to find an appraiser. Type in “real estate appraisal services” and ensure the location is accurate before you hit “enter.” You’ll be provided with a list of appraisal service companies that can help.
Thumbtack is a bit of a mashup between the Home Advisor/Angie’s List format and Yelp. Type “real estate appraisal” and your zip code, and you’ll find appraisers near you. The results aren’t as robust as what you’d find from Yelp but the format is simpler and more straightforward.
What Hurts a Home Appraisal?
We’ve already gone over what can help a home appraisal, but what can hurt it? Here’s a list of things that can hurt a home appraisal:
- A messy house
- A home with little curb appeal
- Structural damage
- Half-finished home renovations
- Overly-personalized home renovations
- Market conditions
- Proximity to eyesores or noise
- HVAC unit issues
- Little closet space
- Garage problems
- Overall square footage
- Improper/outdated building materials
- Number of bathrooms
- The appraiser’s experience level
Close Concierge Can Handle the Details
With Close Concierge, you won’t have to worry about the appraisal process. Your dedicated Transaction Coordinator can handle everything from contract to close while staying compliant. We’ll do it right to ensure that you are paid on time and can be free to close new contracts rather than dealing with the tedium of the transaction process. Contact us or request a demo today to find out more about how we can help!