What do bank appraisers look for?

After conducting the property's physical appraisal, they will then analyze comparable homes in your neighborhood and assess the size and sale price of homes nearby. If you are applying for a mortgage, they will then factor in your credit history, income, assets, and other financial details to determine a loan amount.

uphomes.com - 11 Things Appraisers Look for During a Home Appraisal - UpHomes

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11 Things Appraisers Look for During Home Appraisal

What do appraisers look for when valuing a home? A home appraisal is a critical component in the home buying process, as it determines the value of a property. When making an offer realtors use appraisal addendums to win multiple offer situations, that's how important the role of an appraisal is to both buyers and sellers. Understanding how the appraisal process works can help both buyers and sellers properly prepare, as there are several key items an appraiser will look for when conducting a home appraisal.

Last week we wrote an article on what home inspectors look for and this week we are writing about what appraisers look for! Let's dive into our article that answers the question: What do home appraisers look for?

In this article, we will discuss how the home appraisal process works, what to expect before, during, and after a home appraisal, and how to properly prepare for appraisal day. While the appraisal process may sound daunting to both buyers and sellers, there are several ways to adequately prepare that will help your home appraise.

What is a Home Appraisal?

A home appraisal is an estimate of the home's value. It is typically determined by having a licensed appraiser inspect the home and researching the price homes have recently sold for in the area. Prior to buying a home, a mortgage lender will require a home appraisal to ensure the home is worth the amount the seller is asking. For example, if a seller lists their home for $450,000 and you offer $435,000, the mortgage lender will want to ensure the home is actually worth $435,000. If, after conducting the home appraisal, they find the home is only worth $415,000, they may only be willing to lend $415,000. This means your real estate agent will either have to assist you in renegotiating with the seller on bringing the purchase price down to $415,000, or you as the buyer will have to come up with the funds to make up the difference between what your mortgage lender is offering and what the seller is asking on the house.

Homeowners may also request an appraisal when refinancing their mortgage. A lender will typically request an appraisal to ensure they aren’t lending more money than the home is really worth. After the appraisal is complete, the mortgage lender will determine how much they will lend for the property. So what do appraisers look for during a home appraisal?

What do Appraisers Look for During a Home Appraisal?

When comparing your home to other homes in the area, they will primarily take the size and overall condition of your home into strong consideration when conducting their analysis. If you own a 3-bedroom home in Raleigh, North Carolina, they will compare the amount of similar 3-bedroom homes sold in the Raleigh area when determining the value of your home. In addition to conducting an analysis of comparable homes in the neighborhood, they will also review your home's physical condition and qualities that can’t be changed, such as square footage, zoning, and other factors.

The General Condition of the Home

Before getting too granular, the appraiser will note general details in the home, such as the materials used throughout the home, the condition of the property, and any alarming physical aspects of the property that may impact its habitability. This is one of the first things appraisers look for! If anything seems structurally unsound or unsafe to live in, they will take note. They will also scan the home's overall upkeep, such as missing door handles, leaking faucets, and other maintenance-related issues. While they won’t focus on whether or not the home is clean, they will look for signs of neglect, including broken windows, damaged floors, broken appliances, cracked walls, broken doors, ripped carpeting, etc.

The Home’s Location

Appraisers will look at the home's location. When conducting an appraisal, the appraiser will consider where the home is located. Location plays a critical part in valuing a home. They will assess the home’s proximity to desirable schools, a low crime rate, and the home’s proximity to a hospital, fire station, and police station. They will assess whether or not the home is located on a busy road and if it is in close proximity to owner-occupied homes, renter-occupied homes, or foreclosed properties. They will also note whether it is located in a suburban neighborhood or rural/urban area. In a highly desirable area like Plaza-Midwood or Myers Park which are two ofCharlotte's best neighborhoods, homes will be valued far higher than in less desirable areas. Appraisers will also consider the surrounding homes in the neighborhood. Are they primarily single-family homes, apartment buildings, or commercial properties?

The Age of the Home

One thing many people don't account for that appraisers look for is the age of the home. There are advantages and disadvantages to both new and old homes, so home isn’t necessarily guaranteed to appraise just because it’s new. Older homes are sometimes maintained far more and are located in historic districts whereas newer homes may come with problems. Nonetheless, the age of the home will play a role in the appraisal process. New Construction always is valued higher than homes built a century ago.

The Home’s Exterior

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A home appraiser will take time to review the exterior of the home to ensure it is structurally sound. They will look for any signs of water damage or other problems, such as a chimney that is cracked or leaning away from the home (which could indicate structural damage) along with a lopsided porch or stairs leading up to the home. The quality of the roof will also play an important role in your home’s sale value. Damaged roofs bring on infestation, leaking, and other problems, so the appraiser will assess the home’s roofing quality. If you are aware of your home's roof problems, speak with your real estate agent prior to spending tens of thousands of dollars to repair it. It may be more cost-effective to lower the asking price of your home rather than putting tons of money into installing a brand-new roof. In addition to the roof, the appraiser will also inspect the condition of the siding, garage, porch, deck, and any other exterior elements.

Design of the home

If your home is extremely dated and hasn’t been updated in several years – or decades – the appraiser will take that into account. If the home is outdated, it will appeal to a limited number of buyers and may be more challenging to sell.

Signs of water damage

Water damage brings a host of issues to a home, including mold, mildew, rotting, and more. The appraiser will look for water in the basement, plumbing problems, roof leaks, and any stains on the ceilings, floors, or walls. If there is minor water damage in your home, you may be able to take care of the problem on your own to keep your buyer from walking away from the deal. Water damage is an important aspect of the appraisal process because mold can cost thousands of dollars to remove. Not only that, but mold is also extremely toxic and dangerous to those who are exposed. Mold poisoning can bring on considerable respiratory issues along with a host of other health complications.

Size of the home

When appraisers appraise your home, they consider other homes that are similar in size in your area. They will take your home’s square footage and the number of bedrooms into strong consideration when determining your home’s value. The home appraiser will also assess the size of the lot the home sits on. The garage size will be a contributing factor, as a home with a 3 or 4-car garage will appraise higher than a home with a 1-car garage or no garage at all.

Home’s Interior

The appraiser typically spends the most amount of time inspecting the home’s interior. An appraiser will assess the structure and overall condition of a home. When assessing the home’s interior, they will typically start with the number of bedrooms and bathrooms and whether or not there is a basement, attic, or crawl space. They will take note of the home’s foundation type and will assess the materials used on the floors, windows, and walls. While they will typically not pay as much attention to cosmetic details, they will take note if the home is particularly run down. They will look at the doors, windows, ceilings, walls, and any leaking faucets or visible electrical issues.

Home Improvements

If any rooms in the house – especially the kitchen and bathrooms – have been renovated, the appraiser will take note. Energy-efficient appliances or other eco-friendly aspects of the home are also a plus. They will also note a fireplace or a porch, patio, or fence around the house.

Certain home improvements add value to a home, while others don't.

If your home has central air conditioning instead of individual air conditioners in every room, it may appraise higher. The appraiser will also assess whether your heat is fueled by oil, gas, or electricity and will note any outdated heating and cooling systems. Any additional upgrades that have been made to the home, such as new hardwood flooring, a new garage or front door, a new roof, new siding, etc. will also impact your home’s appraisal.

Signs of Infestation

While the appraiser won’t do a full pest inspection, they will look for signs of termites or other pests on the floors and windowsills. Termites, rodents, and other pests can cause irreparable damage to the home's structure, so this will play a role in the appraisal process.

Safety features

If you are obtaining a government-backed loan – such as a VA or FHA loan – certain safety features will need to be in place. The appraiser will look for smoke detectors on every level of the home, handrails on all staircases, and other safety details.

Common Questions on What Home Appraisers Look For:

Is a home appraisal the same as a home inspection?

While the process behind a home appraisal and home inspection may seem similar in that they both involve analyzing the home's condition, they are two very separate processes. A home appraisal is used to determine the value of a home, whereas a home inspection considers a home's condition to ensure it is habitable. An appraisal is typically much shorter than a home inspection, as a home inspection usually lasts several hours and involves a thorough analysis of the property's condition. The appraiser communicates with the mortgage lender on the amount the property is worth, whereas the home inspector communicates with the buyer or seller of the home on structural problems or repairs that are needed on the property. A home inspector will provide information on how to fix any problems encountered during the inspection process, whereas a home appraiser will not provide details on how to repair the issues they find.

Who conducts the home appraisal?

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Appraisers are licensed professionals who do not have any ties to the mortgage lender, buyer, or seller. They must be neutral third-party who can provide a fair, unbiased appraisal of the home. Appraisers must typically go through several hours of training, depending on the state where they are becoming appraisers. They also typically need an associate’s degree, while advanced appraisal positions will require a bachelor’s degree.

How much is an appraisal?

The home appraisal cost depends on the size of the home and the level of detail involved in the appraisal process, but will typically range between $300 and $450. The buyer typically pays for the appraisal, but the mortgage lender is usually the one who will order it. If the sale doesn't end up going through for whatever reason, the appraisal fee is typically non-refundable.

How long does a home appraisal take?

A home appraisal is much shorter than a home inspection. The home appraisal typically only lasts about 30 to 45 minutes in total. While conducting the appraisal, the appraiser will take pictures of all rooms in the home, the garage, and the outside of the home. They will also measure the home and examine its overall condition, upgrades, amenities, and any other aspects of the home of note.

How does an appraiser determine a home’s value?

What happens if the home appraisal comes in low?

If the home’s appraisal value comes back lower than the asking price, two things typically happen: the seller may agree to lower the price to move forward with the transaction, or the buyer may decide to increase their down payment. If there is a strong seller’s market and the seller isn’t afraid of losing you as a buyer, they might not agree to bring down the price of the home. If that happens and you still want the home, you will, unfortunately, have to increase your down payment to get the same interest rate. If both the buyer and seller can’t come to an agreement, they may decide to walk away from the deal altogether.

How can I prepare for an appraisal?

While it is very hard to change the outcome of an appraisal, there are ways to help the process go smoothly and increase your chances of getting a better appraisal report. The appraiser will consider the property's curb appeal, so spend time on the landscaping and overall exterior of the home. If repairs are needed on the house, such as fixing a faulty door or ripped-up carpeting, it is best to make these repairs in preparation for the appraisal. If you have made considerable upgrades and improvements to the home, provide a list of all upgrades for the appraiser's review.

How can I challenge a low home appraisal?

In some situations, buyers can request a rebuttal on the appraisal, which involves submitting a request for the appraiser to reexamine the home’s value. This might happen if you feel that the appraiser missed significant or unique characteristics in the home or excluded certain comparable homes in their analysis. Unfortunately, rebuttals are not always effective, as appraisers usually will not change a home's valuation. However, depending on the circumstances, it may be worth it to try.

Key takeaways on What Appraisers Look For

What do home appraisers look for is the question everyone wants to know since it is such an important part of the home buying process. While the home appraisal can be a stressful time for both buyers and sellers, it is rare that a home doesn’t appraise at all. A trusted real estate agent will help guide you through the process and will be available to answer your questions when the appraisal report is sent. If you are thinking of purchasing a home in Charlotte, please with us today so one of our local Realtors can assist you!

uphomes.com - 11 Things Appraisers Look for During a Home Appraisal - UpHomes

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