An accurate appraisal helps ensure that a homebuyer is paying a fair price for a home. It also determines how much the buyer can borrow.
The first step in determining the maximum amount a bank will lend on your property is obtaining an independent opinion of value, also known as an appraisal. Most conventional loans are limited to 80% of appraised value. To finance 80% of the purchase, therefore, the appraisal must come in at or above the price in the purchase and sales agreement. If the buyer wants to borrow less than 80% then the buyer might still be approved even if the appraisal comes in lower than the contracted sale price.
Following are some tips to help you get the most accurate appraisal for your property.
What an Appraisal Is and What it Isn’t
People often confuse appraisals with inspections. An appraisal is a general assessment of the home compared to recent sale prices of nearby homes, while an inspection is a deeper dive into the property’s condition. Appraisals are required by mortgage lenders for home purchases and refinancing. Bank appraisals must be completed by a licensed appraiser often chosen from a list of the bank’s approved appraisers.
Appraisals are sometimes confused with Comparative Market Analyses (a.k.a. CMAs). Comparative Market Analyses are prepared by real estate agents. While they are often very accurate, they are not acceptable for bank use. Only a licensed appraiser can perform a mortgage appraisal.
Cost of a Home Appraisal
Typically, the appraisal for a single-family home costs between $300 and $500. This price will vary depending on a number of factors such as the size and complexity of the property. The cost of an appraisal is paid by the homebuyer as a closing cost in most loans. The appraisal is typically ordered shortly after the buyer applies for their mortgage. It is wise to request the appraisal as soon as possible to meet the mortgage approval deadline.
Now that we’ve established what an appraisal is, how can you prime your property to get the most out of it?
Tip 1: Prep the Home to be “Show-Ready”
In this case, you can judge a book by its cover. The seller should try to make the home look as appealing as possible. Ensure the home is neat and clean. The appraiser will include photos of all areas in their report, so you want the home to look its best. You may want to consider doing the following:
– Outside: Mow, weed, remove lawn debris and yard trash
– Inside: Declutter
– Both: Remove objects that get in the way of an easy tour through the property
– What an appraiser is looking for:
– The soundness of the structure, including the roof, foundation, and walls.
– Quality of the workmanship and the condition of features such as windows, doors, flooring, and plumbing.
– Any extra amenities that increase the home’s value, such as a pool or hot tub.
– Proper maintenance of the home, both inside and out.
– Any concerning health or safety conditions.
– Confirmation of the square footage.
Tip 2: Make Sure the Listing Agent has Supportive Comps
Often neighbors know of private sales in the area that could be overlooked by an appraiser who relies heavily on the MLS. Sometimes appraisers are grateful for the additional info, and sometimes they are not. It’s a judgment call on how much information should be passed along.
What an appraiser is looking for:
– Their personal impression of the home’s condition.
– Accurate measurements of the property, outside and inside.
– Age of utilities
– Configuration of the floor plan
– Condition and character of the neighborhood
– Comparable sales
Tip 3: Assemble an Appraisal Packet
Generally speaking, the more relevant information the appraiser has, the more accurate the appraisal. Providing information not readily available online – think private home sales of similar properties – can return better results.
Include a list of current upgrades that you’ve made, possibly with receipts attached. An example could include “Over the past few months, we’ve repaved the driveway, replaced the roof, and updated the downstairs bathroom.” or “Here are the papers to show that our septic system is only 2 years old.” (Information that is not easily apparent to the appraiser is worth pointing out.)
Work with your realtor to gather relevant paperwork and organize it in a folder or envelope for the appraiser.
What an appraiser might appreciate:
– Information that helps them get the job done more quickly.
– Accurate square footage and other useful statistics.
– Notes about updated features and appliances.
– Factors that affect the valuation of the home against comparable properties in the area.
– Any supportive information not easily obtained online or in public docs.
In an appreciating market like this one, you sometimes need to go the extra mile to make things fall into place. Follow these tips to optimize the value assigned to your property. Give us a call (401) 845-9500 or shoot us an email info@hoganassociatesre.com if you’re looking for help buying or selling your home. We’ll guide you to the best possible outcome.
