If you are a homeowner and considering refinancing your home, then you must get a home appraisal done. Read this article and learn what a home appraisal is, how it works, and what hurts a home appraisal so that your home appraisal meets your expectations.
Learn What Hurts a Home Appraisal to Secure a Favorable Value
What Is a Home Appraisal?
A home appraisal is a procedure in which a professional determines the value of a home. The appraisal protects the bank from lending the borrower more money than the property’s worth. It also allows the bank to resell the property and get the loan back if the property goes into foreclosure.
A home appraisal isn’t the same thing as a home inspection. An inspection examines any problems and structural flaws that need to be addressed. However, an appraisal is conducted by a third party on behalf of the lender to determine how much value a home is worth.
An appraisal can be ordered through a third party called an appraisal management company (AMC). The home buyer must pay for the appraisal upfront. A home appraisal can cost from $300 to $800. This cost might even go higher depending on the size and condition of the home.
A home appraisal checklist includes:
- Exterior and interior condition
- Number of stories and rooms
How Does a Home Appraisal Work?
An appraiser will spend up to one hour measuring the size of the home, inspecting amenities, evaluating the general condition of your property, and taking photographs of everything.
Next, they look through the transaction records of residences that are comparable to yours. The records used for value comparisons usually come from 4 to 5 houses within a 1-mile radius from yours and have been sold in the past six months. This provides the appraiser with updated information to support the evaluation.
Finally, the appraiser makes a professional assessment of how much your property would sell for. The bank uses this figure and your income, assets, and credit history to determine how much money it will lend you and on what terms.
What Hurts a Home Appraisal?
Several factors negatively affect the home appraisal process. Below are the most common ones that you should consider.
One of the reasons that your home appraisal comes in low is the lack of maintenance. Every house deteriorates after a couple of years, which reduces the overall value and brings the appraisal down. The biggest enemy of house deterioration might be a water leak. So, make sure that you keep your house leak-free.
Don’t try to conceal any flaws or details of your home before the appraiser arrives. Ensure that all the rooms and spaces of your home are open without any blocks. Otherwise, the appraiser won’t be able to give an accurate estimation or even come up with a complete evaluation. This may end up with the appraiser charging you another fee to reappraise your house.
Any structural damage such as cracks in the walls or flooring will harm the appraisal. The appraiser may even detect flaws you are unaware of since structural deterioration typically goes unseen.
Your neighborhood might be one reason that affects the appraisal. Most of the time, the appraiser will look around the local area to make a comparison. If a neighboring house was sold at a lower price than the number you expect your house to be at, the appraiser might consider that and reduce the value of your house.
Everybody knows that the value of real estate properties fluctuates according to market conditions. Therefore, an appraiser will also look at whether sale or lease prices are rising or falling in your location, as well as whether foreclosure rates and vacancies are falling or rising.
A lack of experience might incline the appraiser to make an inaccurate evaluation. An expert appraiser may see features that increase the worth of your house that a fresh appraiser might overlook. On the other hand, a skilled appraiser will notice the little flaws that detract from the value of the property. They are aware of what to search for as well as what homes may try to conceal.
Where the home is located can contribute to what hurts a home appraisal. A property near a suburb may sell for less than one in the back of the neighborhood. School density, road maintenance, and local amenities are all possible factors too.
Construction materials are another factor that will hurt a home appraisal. Modern homes using good materials will generally be valued more. In contrast, poor-quality materials found in dated houses might bring down the appraised value.
The last factor that might affect the assessment process is the style of the home. If the house has an overly-personalized style, the appraiser might think that the home will not be a good deal for many buyers, thus reducing its value. Try to bring the style of your home closer to more buyers by neutralizing its decoration.
What to Do When the Appraisal Is Low?
The result of the appraisal process can come in either higher or lower than the number you would like it to be. If the appraisal’s value is higher, that’s great because that is what you would like to see. But what if the appraisal is lower than your expectation?
The first thing you can do is challenge the appraisal by persuading the appraiser to make an extra evaluation to bring the value higher. You might also renegotiate so that the appraisal’s value matches your desired number.
Nevertheless, if you are unable to challenge a low appraisal and the appraisal values your property at less than 80 percent equity, you will have to pay Private Mortgage Insurance (PMI).
So now you know what hurts a home appraisal. Understanding what might cause the value of your property to come in low helps you have better preparation if you’re expecting an appraisal.
If you have questions about what hurts a home appraisal or any of the details discussed here, connect with us and learn more.
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For a free, private consultation, contact us now! This might be the first step in avoiding an expensive and prolonged property holding term.