If you plan to refinance a mortgage, you must get an appraisal on the property.
An independent appraiser will inspect your house in person and look up the transaction records of similar properties that have sold recently to arrive at a valuation of your home.
If the appraisal shows that the equity you have in your home is less than 20% of its value, your lender may require you to buy private mortgage insurance (PMI), ask you to pay more up front, or offer you a higher interest rate. And if your home’s valuation is lower than what you owe on the mortgage, you won’t qualify for refinancing at all.
Doing a deep clean of your home, freshening up the interior and exterior, and fixing up areas that need repair can help you get a higher appraisal.
Appraisers are licensed or certified professionals who are independent of both the lender and the borrower. They know the local area, and their job is to provide an expert, unbiased opinion on the value of your home. This is to ensure that you don’t borrow more money than the property is worth.
Your lender will order an appraisal through an appraisal management company, an individual appraiser, or its in-house appraisal department.
The appraiser will visit your home for 30–60 minutes to inspect it inside and out. They will measure its dimensions, take photos, look at all aspects of the home, and assess the overall condition. Next, the appraiser will research and compare the transaction records of similar properties that have sold recently in the area.
The appraiser will use those records and the results of the in-person visit to arrive at an expert opinion of how much your home would sell for on the market.
The lender will then consider that number, the appraisal – as well as your income, assets, and credit record – to decide if you qualify for refinancing, how much and on what terms.
You can usually expect to pay around $300 to $500 for a single-family home. Appraisers have no stake in whether you qualify for refinancing, a HELOC or HEA.
Think of getting a home appraisal as going on a first date. While you may not have much control over whether your partner will find you attractive, looking well-groomed and put together improves your chances.
Pay extra attention to areas you don’t often clean, such as windows, walls, carpets, curtains, the insides of cabinets, and ceiling corners. For best results, consider hiring a professional cleaning company.
Organize and put away anything that may get in the appraiser’s way. If your attic, basement or other storage areas are messy, be sure to tidy them up. An uncluttered home is easier to inspect and looks better maintained.
Any home improvements will reflect positively on your appraisal, including:
Replacing the roof, siding, gutters or HVAC units
Remodeling the kitchens or bathrooms
Updating the flooring or countertops
Repainting the walls
But even minor, low-budget improvements like hanging new curtains, replacing the bathroom caulk, or installing new faucets or doorknobs can give your home a more modern appearance.
Walk around your home and look for anything that might need fixing. Things to watch out for include:
Leaking roof or gutters
Dripping pipes or faucets
Small issues like these can decrease the total property value by a few hundred dollars each. So, if a repair will cost less than that, it’s best to fix it before the inspection.
Ensure that fire extinguishers, smoke alarms, carbon monoxide alarms, home security systems and other pieces of safety equipment are installed and working properly.
If you have pets, it’s best to get them out of the way during the inspection. Don’t forget to neutralize or mask any pet-related smells as well.
Start by freshening up the exterior paint where needed, mowing the lawn, and trimming the trees and shrubbery. Next, remove any dead trees, leaves and grass; weed the flowerbeds; remove clutter; and power-wash the driveway, deck and other external areas. Finally, consider planting healthy plants and flowers, adding mulch or installing landscape lighting.
Are there any new public amenities in your neighborhood, such as schools, parks, hospitals, stores or highway ramps? Be sure to let the appraiser know, as these can add value to your home.
During the inspection, be proactive. Bring any unique but harder-to-spot assets, and all recent improvements, to the appraiser’s attention.
Have you put money into your property? Make sure you can prove it. Take before-and-after photos of any repairs and home improvements, and keep all the paperwork at hand.
If you got a favorable appraisal, great! Your lender or HEA provider will advise you on how to proceed with the next steps of the refinancing process.
If you get an appraisal lower than what expected, you can appeal, but keep in mind that the chances of success are slim. To change a valuation, you’ll need substantial evidence that the appraiser made an error, such as if they disregarded an essential amenity, or listed the room count or square footage incorrectly.