A home appraiser is a professional who studies different aspects of your home to give a fair-market appraisal of how much it is worth. This could be a vital part of your success in being approved for a home loan or refinancing with some of the best mortgage lenders.
However, there may be things that an appraiser may be looking for or information they may need that you haven’t factored in. Before an appraiser looks at a property you want to buy or currently own, here are a few things you need to know.
They work for the bank
Appraisers aren’t in the position to help you or make it easier for you to get a loan. They may not be in your corner when deciding how much your home might be worth. Instead, remember when you start a home loan process that the appraiser works for the lender approving your loan and not for you.
Appraisers not only take things like bedrooms and bathrooms into account but also square footage and overall lot size. And how much of your lot is taken up by the home could also be a factor in the final decision.
Remember that your appraisal may not match other homes with the same number of bedrooms if the overall size is different.
Location is important
There are factors that may not have been an issue for you but could be an issue when it comes to the appraisal. Living on a busy street might be something that doesn’t bother you but could affect the home’s value.
They also may factor in the neighborhood school district or crime rate. And the type of neighboring dwellings like single-family homes or apartments could be an issue as well.
It’s not just about your house
One thing appraisers take into account is the homes around yours. Homes with similar square footage and bedrooms in the same neighborhood may give appraisers a good historical idea of how much those homes have sold for when trying to determine the cost of your house.
It isn’t a home inspection
Home inspectors play another role in the home-buying or refinancing process. They visit your home and look for possible issues that might need to be fixed before you list your home for sale. Or they work for the potential buyer, making a list of house issues that might have to be addressed or negotiated before the final sale.
Remember that home inspectors are focused on issues with the house itself and not the price of the house, the cost of repairs, or how much you may be able to bump up the value of your home once the repairs are made.
Home improvements can matter
Homes with dated features like out-of-style kitchens and old bathrooms could take a hit on the final appraisal. Refurbishing your home’s features to bring it up-to-date could make it more desirable and increase the appraiser’s assessment.
Be aware that a $50,000 kitchen renovation doesn’t mean you will get a $50,000 bump in your appraisal. It could increase the value of your home, but that might not equal the amount of money you invested in it in the appraiser’s eyes.
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You can ask for a second opinion
While it may not be binding when it comes to the final decision by the bank, you can have another appraiser come to look at the house.
Check with your real estate agent to see if they can recommend someone to give you an estimate before the bank’s appraiser comes in. They may be able to give you a rough estimate of what your home could be appraised for so you don’t have any surprises.
Leave them be
Home inspectors may want you to follow them around so they can point out issues with your home or potential problems. Home appraisers would prefer to leave them alone.
If there are specific issues or renovations you may want them to take into consideration, consider making a list for them at the beginning of the appraisal instead. Then let them do their jobs.
Water damage might be an issue
A small leak here or there may not be a problem. But if an appraiser notices things like severe water damage or mold, that could be a big issue.
Major water problems can cost thousands of dollars to fix, and obvious damage may reduce your appraisal when it comes to the final estimate of the home’s value.
Factor in the fees
A bank isn’t likely to send an appraiser to review your home for free. So when you consider all the money you have to bring to a closing, remember that the bank may charge you for the appraisal as part of the closing costs for your loan.
Pro tip: If you’re looking for ways to prepare for a coming recession, consider how a downturn in the market might affect the assets you plan to use for a down payment and closing costs.
You can challenge an appraisal
It might be difficult to challenge an appraisal, but it is possible. Check the appraiser’s report if you think it’s higher or lower than expected. Did they forget to include a bedroom or cost the number of bathrooms incorrectly? Did they not factor in things that you think should be included?
These may be grounds for a challenge. Nevertheless, it could be difficult to get a decision in your favor when you make that challenge.
Buying a new home or refinancing your current home is a stressful endeavor, especially if you're looking for ways to stop living paycheck to paycheck. But it could make the process easier if you understand what the appraiser factors into their decision.
Talk to your real estate agent or lender if you have any questions during the loan process, including the appraisal of your home.
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