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Before you complete the home buying or selling process, it’s required that you first get an appraisal, which gives an estimate of your property’s value, on the home in question.

The findings from an appraisal determine the amount a mortgage lender will let you borrow for the property, while also protecting you from paying more than the house is worth.

The appraiser determines the home’s worth based on factors such as:

  • Location
  • Condition
  • Neighborhood comparables, which are local houses similar to yours

An appraiser will also look for any health or safety concerns in the home. If a significant amount of red flags are raised, this could halt the home buying or selling process.

Whether you’re looking to buy or sell a home, it is important to know what appraisers look for during an appraisal.

How Do I Prepare for a Home Appraisal?

Commonly confused with a home inspection, the goal of a real estate appraisal is to determine the value of a property, referred to as market value. A home inspection seeks to find the flaws in a home, like problems with the foundation, furnace or roof. While a home appraiser considers these issues, their main goal is to determine the worth of a home.

Before you learn how to prepare for a home appraisal, here’s a list of what a home appraisal will entail to determine the market value of your home:

  • A property inspection
  • The value of local comparables that are similar to your home
  • An appraisal report based on the inspection and comparables to determine the home’s estimated value

In order to prepare for a home appraisal, you need to focus mainly on both the interior and exterior property inspection process and what an appraiser looks for during this process.

What Do They Look for in a Home Appraisal?

During the inspection portion of the home appraisal, the appraiser considers both the interior and exterior of a home to get the best value of the house.

Exterior-wise, the appraiser will consider:

  • The total land area or acreage of your property
  • The condition of the property
  • Any lead or peeling paint, but only if the house was built prior to 1979

Interior-wise:

  • Working furnace
  • Working air conditioning
  • Number of rooms, although they will also consider windows and closets
  • Garage, although it does not contribute to the square footage of the home
  • Upgraded basement, although it does not contribute to the square footage of the home
  • Built-in appliance upgrades
  • In-ground pool

If you have upgrades in your home, make sure they are completed before you schedule an appraisal. Unfinished projects reflect poorly on the home value.

The same goes for the presentation of your home. While an appraiser cannot take the overall cleanliness and style into account, the estimated value of your home may be effected by holes in the wall or peeling paint.

Based on the appraiser and the condition of your home, the appraisal can take anywhere from 25 to 45 minutes to complete.

Home Appraisal Checklist

In addition to checking the exterior and interior condition of the home, the appraiser will also look for anything needing repairs. Here are some spots to check out before your appraisal and how you can prepare:

  • Check your electric garage door opener to make sure it’s working
  • Secure a handrail on steps or stairwells
  • Secure second floor doors with decks
  • Secure a railing to any and all raised decks
  • Ensure all utilities are functional with no safety issues
  • Ensure water, electricity and air conditioning is functional
  • Address any plumbing, roof leaks or stains
  • Check for cracks in the walls, ceiling or foundation
  • Check for water intrusion through the foundation
  • Ensure your roof is sound and has at least three years of economic life remaining

This is by no means a complete checklist of repairs that might need to be addressed before a home appraisal. It is, however, a list of the most common issues that may arise either before or during the appraisal inspection.

By addressing any repairs or upgrades before the appraisal inspection, you’ll be better equipped for a smooth home buying process, and possibly, a higher home value.

What is an FHA Home Appraisal?

FHA home appraisals are slightly different. If you’re looking to get an FHA loan, many repairs must be completed prior to closing. This impacts both the buyer and the seller because the home loan process absolutely cannot progress until a few repair items are met. Let’s discuss what those are:

FHA Appraisal Checklist

Other than the normal health and safety concerns addressed in a normal home appraisal inspection, FHA loans require:

  • Exposed floorboards and wall studs to be secured
  • Chipped or peeling paint, especially lead-based paint if built before 1979, must be scraped and painted
  • Water damage must be addressed, including any plumbing, roof or foundation issues associate with the damage
  • Holes in the roof or siding must be repaired
  • Driveway or sidewalk damage must be corrected
  • An outlet within 10 feet of a water source that has only a regular two-prong plug
  • A grounded plug or a GFI outlet designed for bathrooms, kitchens, garages and anywhere outside where you need an electrical outlet must be installed

Any red flags raised during the appraisal inspection need to be fixed before closing. There are two ways to compensate an FHA repair:

  • The buyer agrees to pay for the repair upon the event of the seller lowering the price of the house to compensate for the cost of the repairs
  • The seller agrees to pay for the repair as part of the purchase agreement; all repairs must be completed before the loan can close

VA Home Inspection Checklist

Like FHA appraisals, VA home appraisal inspections have their own standards for acceptable home conditions. In addition to the standard, conditional loan appraisal requirements, VA home appraisals will require:

  • Clean drinking water, a water heater and a sewage system
  • Working electricity, heating and air conditioning
  • Sound roofing
  • Sound foundation
  • Pest and termite inspection
  • Appropriate living spaces, including the bedroom, living room and kitchen

Just like FHA or conventional home appraisal, any repairs or safety or health concerns will slow down and possibly put a halt to the home buying process until they are addressed by either the buyer or seller.

A home appraisal must be also completed by a VA-certified appraiser, assigned by the Department of Veterans Affairs.

Is an Appraisal Required for a Conventional Loan?

It’s also important to know when you’re able to skip the appraisal process entirely.

The short answer is that Freddie Mac and Fannie Mae offer the ability to skip the appraisal on certain types of purchase and refinance loans using appraisal waivers – a document that allows you to move your loan process along without an official appraisal.

However, only few loans qualify for a waiver.

For example, Fannie Mae loans require a property inspection waiver in order to waive an appraisal, while Freddie Mac offers what is called an automated collateral evaluation. Both Freddie Mac and Fannie Mae have the ultimate discretion on whether or not they’ll be able to offer a waiver at any time, so it’s best to speak to one of our Home Loan Experts to determine if you qualify.

The Next Steps After a Home Appraisal

After your home appraisal is complete, the appraiser will assign a monetary value to the property based on the findings in the inspection and the comparables in your area and then send their findings to the mortgage lender.

Your loan amount will be based on the number that the appraiser assigns to the property, so if they say the home is worth $190,000, your lender will only loan that exact amount. This is unfortunate for the seller if they have the home listed at a higher price, as the lower home appraisal will affect their chances of getting that amount on the home loan.

If you have further questions about what the home appraisal process entails, let us know in the comments below.

 

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This Post Has 11 Comments

  1. Thanks for pointing out that any safety concerns or damage to the house will slow down the process of selling the house. With that in mind, I will be getting the house repaired before this year ends since we plan to sell the house next year. This is because we plan to downsize now that our kids have their own families already. http://www.4constructionservice.com/services

  2. Iam looking to purchase an older home built in 1954. It has been inspected an found discrepancies the electric panel is not up to code and the water heater needs to be replaced . Will this affect the loan from the bank when the appraiser goes to appraise it?

    1. Hi Christy:

      If either of the issues impact the safety or habitability of the home, they usually have to be fixed before the loan can close or within a certain timeframe after the closure of the loan. That’s the short answer. Hope this helps!

  3. My mother passed away, her home is not paid for. I would like to buy out my brother’s half of the equity in the home, so we are having an appraisal. The heat/AC unit in the home is on it’s last leg…but it is the original so is 38 years old. The unit will come on, but does not cool well so we use window units. My brother wants the home to appraise high so does not think the unit should be a consideration since it was working two years ago when my mother lived there. But I thought the purpose of an appraisal was an unbiased opinion of the value, thus we can’t pick and choose what he values it at? Would a 38 year old unit not be a negative on a home appraisal?

    1. Hi Stacy:

      It is an unbiased evaluation and you don’t get to pick. When it comes to an appraisal, they may note that it’s on its last legs, but if it turns on, that’s what they’re really looking at. It could affect the appraisal, but it might not.

  4. What would the typical ARV be on a $10,000 screen porch addition to a home?
    Thank you in advance for your insight!

    1. Hi Daimon:

      Unless you’re flipping and selling a property, I think you should consider the return on investment (ROI) of a screened-in porch, rather than the after repair value (ARV), since that formula is only used to calculate the maximum bid prices on flipped homes. After doing some quick research, most articles suggested that screened-in porch additions can see an average 70% ROI on what was originally spent. So if you were to spend $10,000 on this project, you would expect an ROI of $7,000. I hope this helps!

  5. When buying a house and the buyer makes repairs needed to pass the appraisal will the value of the house go up

    1. Hi Delia:

      It’s likely that the value wouldn’t go up. The appraiser is giving you the value on the basis that these repairs will be made. You need the repairs before the house can be considered livable and eligible for financing. So it doesn’t affect value. If you make other improvements down the line, that would boost the value.

    1. Hi Mary:

      Our friends at One Reverse Mortgage could definitely help you look at your options as long as one of the people on the loan’s age 62 or older. You can get started online or give them a call at 888-980-1543. Hope this helps!

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