Understanding the Home Appraisal Process

Regardless of the sales price that the buyer and seller have agreed to, the mortgage lender’s loan amount will be based on the appraised value. If the appraised value is lower than expected, the buyer and seller may be required to renegotiate the sales contract. Understandably, this is not desirable for either party. Knowing what appraisers look for as they inspect a home can help you to prepare for your appraiser’s site visit.

On the Exterior
Most licensed appraisers use the Uniform Residential Appraisal Report, and this means that they will all generally review the same factors and features on the interior and exterior of the home. On the exterior, appraisers look at the lot size, zoning, connected utilities, the garage and other features that will impact valuation. While the appraiser is not a property inspector, the appraiser may adjust value based on obvious repair issues. This could include wood rot on the trim, a deck that is falling apart or other issues.

Inside the Home
The square footage and layout are reviewed inside the home as a starting point for the interior portion of the appraisal process. The appraiser will take note of high-end materials that may be considered upgrades for the market. Other features that may boost value are a central vacuum system, a security system, a built-in sound system and other enhancements. On the other hand, property damage, signs of a pest infestation, visible mold and safety concerns may be noted in the appraisal report, and these issues could impact the final valuation.

Other Important Factors
The age of major systems and features could impact valuation as well. For example, the home may be appraised slightly higher if the roof was replaced in the last few years compared to if the roof is 20 years old. The age of the HVAC system, the water heater, the windows and other features come into play as well. If the home has recently been renovated or remodeled, receipts for the work can be provided to the appraiser. The appraiser will not necessarily increase the final valuation on a dollar-for-dollar basis, but the cost of recent upgrades may be taken into consideration to some degree.

Now that you are aware of what the appraiser looks for, you can be better prepared for the process. Your real estate agent may provide helpful insights about what you can do to prepare the home for the appraiser’s site visit.

Contact one of our loan consultants to learn more.