A home appraisal is a determination of a home’s worth in the current market. Whether you’re buying a home or refinancing your current home, the appraisal is one of the most critical steps in the application process. That’s because the home’s appraisal amount for has a major impact on the size of the loan you will qualify for.
In order to make the most of your appraisal, it is important to understand what it is and why it’s done. Several factors are taken into consideration in arriving at the appraisal amount, including the location, size and condition of the premises. The purpose of an appraisal is to make sure the loan is within the market value of the property, which will protect the lender in the event the borrower(s) default on the loan.
What Can You Do To Prepare For Your Home Appraisal
While a good portion of the outcome of your appraisal is out of your control, there are certain things buyers, sellers, and homeowners can do to influence it.
As a buyer – Typically, buyers have the least control over the appraisal process. However, it is important for buyers to make sure that the agreed upon selling price is reasonable for the present market. This requires buyers to do their homework prior to making an offer, studying the area’s comps and getting a good sense of the neighborhood and condition of the property. This is such a critical step because, in the event the home appraises for below selling price, the buyers will be responsible for coming up with additional down payment money to prevent the deal from falling through.
As a seller or refinancing homeowner – As a homeowner who is either selling their home or applying for a refinance loan, there is a bit more you can (and should) do to help ensure a favorable appraisal. Homeowners looking to refinance their mortgage may not have the ability to do so if the appraiser determines that the home doesn’t have enough equity. Also, sellers run the risk of having the sale fall through in the event the home appraises for less than the selling price.
First, you’ll want to make any necessary repairs or reasonable improvements to enhance your home’s curb appeal. Make sure all appliances are in proper working order, and thoroughly clean and declutter the entire premises, inside and out. It’s also a good idea to touch up paint as needed, fix leaks, replace broken glass, clean out flower beds, mow the lawn, etc. Next, make sure to have any applicable paperwork available. The appraiser should have some knowledge of your neighborhood, but be ready to provide background information should they need it. Select similar homes within a one-mile radius that have sold recently that can supplement the appraiser’s research. Gather any receipts for repairs as well as any recognition or accolades your town and/or school district have been awarded.
It is important to remember that even though the appraiser works for the lender, the borrower will be required to pay for this service and it is in your best interests to do everything possible to ensure a favorable outcome. The decision of the appraiser can ultimately make or break a deal, and can cost, buyers, sellers, or refinancers a great deal of money.
If you have any more questions about the home appraisal process, feel free to contact Cliffco Mortgage Bankers today.