From PennyMac
What Is a Home Appraisal and Why Is It Important?
A home appraisal is an unbiased report on the value of your home performed by a trained and state-licensed individual. Appraisals are an essential part of the home financing process, ensuring the homebuyer, seller and mortgage lender each have an impartial, consistent and accurate assessment of the value of the property under consideration.
The lender is responsible for ensuring that your home provides adequate collateral for the mortgage. For most loans, the lender obtains a signed and completed appraisal report that accurately reflects the market value, condition and marketability of the property.
It’s the appraiser’s job to provide a factual, unbiased and detailed description of the property and the neighborhood. They must take into account all factors that influence a home’s value when developing the market value opinion in the appraisal report.
Home Appraisal Cost
While home appraisal costs can vary by state and property size, the fee can range between $300 and $1,200. Most fall somewhere around $600-$1,000, with costs based primarily on the geographical area of the home.
How Long Does a Home Appraisal Take?
From start to finish, the home appraisal process usually takes approximately 7-10 days to complete.
The required in-person visit by a home appraiser can take over an hour, depending on the size of your home. However, several other steps are involved in making an unbiased and professional assessment of your home’s value. Your appraiser will research trends, local county records and recently closed comparable homes in your area, known in the industry as “comps.”
Once your appraiser compiles and analyzes all the information and data, they will present a final report of your home’s value.
What Do Home Appraisers Look For?
A home appraiser uses several sources of information to determine a property’s value. As part of the assessment, the appraiser will visit the property in person and review recently completed sales of comparable homes. Common factors examined during home appraisals include:
Property size. In real estate appraisals, size significantly affects the final number. In general, the higher the square footage of a home, the higher its value. An appraiser will also look at the kitchen, number of bedrooms, bathrooms and closets.
Exterior condition. When assigning a value to your property, the appraiser will consider not only the exterior appearance of your home but also its condition. They will check the following:
- The condition of the roof, foundation, siding, gutters, chimney and walls, looking for signs of leaks, mold and other safety hazards
- Lot size, including front and backyard square footage
- Pool, outdoor kitchen, deck, porch and other amenities
Interior condition. Again, this refers not only to the appearance of the interior but also to the working condition of standard household assets such as:
- Plumbing
- Electrical and HVAC systems
- Doors and windows
- Light fixtures
- Any kitchen appliances to be included in the sale
Attic, basement and foundation. A finished basement or attic may impact a home’s value, but these areas must meet specific requirements to be considered part of the Gross Living Area (GLA). An appraiser will also evaluate your home’s foundation and its condition.
Home improvements and renovations. Tell your appraiser about any work or upgrades you have done to spruce up your home. This can include anything from the central air system you installed 10 years ago to the kitchen flooring and countertops you just renovated (along with the new oven and fridge to match, of course).
What Hurts a Home Appraisal?
If an appraisal is in your future, it’s essential to understand the factors that could negatively impact it, such as the following:
- Low-value comps and decreasing neighborhood property values
- Poorly maintained interior or exterior
- Age of the home
- Location, such as a flood zone or busy road
- Signs of mold, insect infestation, leaks or other safety concerns
- Issues with the home’s systems, such as plumbing, electric or HVAC
- Lack of parking
- Hazardous construction materials like lead paint or asbestos tile
- Outdated or faulty plumbing, electrical and heating systems
Some issues are in your control and some may not be. Whether you choose to address the correctable concerns or not, being aware of crucial appraisal criteria can help you avoid the potential unwelcome surprise of a lower-than-expected home value.
Top 7 Tips Home Appraisal Checklist
How does one best prepare for a home appraisal? We put together a checklist of common (and not-so-common) tips to help you get a high valuation from your appraiser.
1. Do Your Own Appraisal
Imagine that you are the appraiser. Walk around your home’s interior and exterior and really scrutinize it as if you were going to complete the appraisal report yourself. Take note of any obvious damage or deferred maintenance that needs your attention. Leaks, broken systems and damaged surfaces should all go on your list of things to repair.
Thoroughly inspect safety equipment like smoke alarms, carbon monoxide alarms and home security systems. Are they all functioning, or do parts or entire systems need to be replaced? Make a plan to repair these issues and clean up any cosmetic issues that may have occurred as a result.
2. Investigate Comps
Check out recent home sales in your neighborhood. What has the price range been for homes with features and updates similar to yours? The values of these comparable homes should be similar to what your home will appraise for. This information can help you know where to focus your time, efforts and funds.
If you know a neighbor (or real estate agent) who recently sold a home in your area, contact them to find out if there were any appraisal issues or insights that they can share.
If you’re working with a real estate agent, you can request that they collect some comps for you and your appraiser to review. Particularly if your home has unique or uncommon features, your agent may need to get creative while staying within the guidelines for selecting comps.
A quick way to get a rough idea of how much your home is worth is to use a home value estimator calculator. Add some basic information to gauge your home’s current value and view recent home sales in your area.
3. Get Superficial
Clean your house from top to bottom and remove extra clutter. Once you’ve scrubbed and straightened up everything possible, consider making some easy, low-cost cosmetic updates that can have a big impact, like the following:
- Paint or touch up existing paint
- Hang updated window treatments
- Replace worn faucets, doorknobs and cabinet hardware
If you’ve been planning to update your decor after you move, consider bringing in a few of the newer pieces to make the old house look fresh and modern. Downsizing or packing for a long-distance move? Ask your real estate agent if they have staging furnishings you can borrow or recommendations for a service you can use.
4. Make Your Outdoor Areas Truly Great
Now that your home’s interior looks fantastic, it’s time to pay attention to the exterior. Make sure that your landscaping is looking its best by doing the following:
- Mow your lawn, trim your trees and bushes
- Remove weeds and dead vegetation
- Add color with inexpensive, seasonal flowers in the spring, summer or fall, and ensure that snow removal is neat and tidy in the winter
You’ll also want to:
- Remove outdoor clutter, like yard tools and stray toys, from everywhere on the property
- Consider staging any outdoor living spaces with new furniture or accessories
- Power wash your home’s exterior, as well as your driveway and any deck or patio surfaces
- Ensure your pool is well-maintained and in safe operating condition
Most of this can be accomplished in a weekend, and the increased curb appeal will be worth it.
Check out expert tips for outdoor home renovations — you may find just the right improvement to increase your value!
5. Be Sure To Share Your Upgrades
Tell your home appraiser about the improvements you’ve made to your home. Inform them of upgrades like the following that will positively impact your appraisal value:
- New features that you have added, like a security system
- Updated HVAC units
- Exterior improvements like siding, gutters or a new roof
- High-value room remodels like kitchens and bathrooms
An easy way to make sure that your appraiser remembers all of these improvements is to create and share a short, one-page list detailing each. You should have this list ready in advance and include any applicable permit information.
6. Know Your Neighborhood
Make your appraiser aware of any recent improvements in your overall neighborhood. It’s worth mentioning things like:
- New or highly rated schools
- Parks
- Transportation enhancements
- Shopping
- Other beneficial amenities
These kinds of changes can add significant value to your home, and if your appraiser is not a local resident, they may not be aware of them. Appraisers are often familiar with the general area, but you probably know your specific neighborhood better than they do.
7. Stay Focused
While you are working your way through the tasks and updates listed above, it’s important to remember not to go overboard and take on too many projects. Invest your time, money and effort only on issues that clearly need attention. If you’re getting an appraisal for a home you’re selling, you most likely already have a buyer who liked your home enough in its current state to make an offer on it. Making unnecessary major changes could end up being a waste of your time and resources.
Your home’s selling price is affected by much more than just the appraisal! Find out how the time of year can increase your sale price.
Although it’s not possible to change your bungalow into a country estate overnight, taking the time to tackle a few strategic projects before your appraisal can help put you in a better position to get the outcome you want. If you’re ready to move or refinance the home you love living in, get a custom mortgage rate quote from Pennymac today. Our Loan Experts can answer your questions and help guide you through the mortgage loan process.
