What Do Home Appraisers Look for When Refinancing? Everything You Should Know

Are you refinancing your mortgage? You may need a home appraisal to lower your monthly payment.

Many homeowners refinance to secure a better interest rate or pay off their loans faster. Some may also want to lower their monthly payments or tap into their home’s equity to invest in renovations.

Whatever your reason for refinancing may be, many lenders require homeowners to have a successful home appraisal. An appraisal will determine your eligibility for refinancing and what the new loan amount will be.

Read on to learn more about this key part of the refinancing process. We cover how an appraisal affects refinancing, how to prepare your home for an appraisal, and more.

What is a home appraisal?

A home appraisal is when an appraiser determines the value of your property. An appraiser is a certified, independent professional and is able to provide an accurate, unbiased valuation. They will report this valuation to the lender.

The lender then uses this valuation to determine whether or not you are eligible for refinancing. The valuation also influences how much the loan amount will be.

Lenders will loan you less that your home is worth. If you end up defaulting on your loan, they will be able to sell your property to make up for the loss.

How much does a home appraisal cost?

Fees vary from state to state. Typically, you’ll have to pay anywhere from $300-500.

You’ll pay this fee to the lender, who will then hire the unbiased appraiser. Keep in mind that you will not get a refund if the loan doesn’t close; this is because the professional needs to be paid for the work they do regardless of the outcome.

You might be hesitant to pay this fee as it doesn’t guarantee you’ll be eligible for refinancing. However, you should realize that an appraiser can’t discuss what a home might be worth before the lender pays for their services. A paid home appraisal is the only way a lender will consider you for refinancing.

Seeing as you can’t get a refund, you’ll want the appraisal to be successful the first time around. Read on to learn more about the process and how you can get the highest possible valuation.

What does an appraiser use to determine your home’s value?

So, what do home appraisers look for when refinancing? They usually consider two main factors.

The first is the recent sales of comparable properties. They’ll look at the records of similar homes in your neighborhood and how much they sold for. Then, they’ll use this data to determine how much your home could sell for. This data plays a large role in their overall valuation.

The second factor the professional considers is the condition of your home. During an in-person visit, they will do tasks such as the following:

• Measure dimensions and count the total number of rooms

• Examine the interior and exterior condition

• Make note of any improvements/renovations

• Determine how functional the layout is

• Examine the amenities

• Take photographs of the interior and exterior

The in-person visit should take anywhere from half an hour to an hour. The professional will use the information they gathered and comparable property sales to come up with a final evaluation.

How to Prepare Your Home for an Appraisal

You don’t have control over how much the other homes in your neighborhood have sold for. The appraiser will look at this data and do with it what they will.

However, you do have control over the condition of your home. You can make tweaks that will result in a higher valuation. Prepare for the in-person visit by doing the following:

• Make minor repairs. Things like leaky faucets, flickering light bulbs, and unsecure stair railings can all bring down your valuation. Take some time to fix these minor details before the appraisal.

• Make the visit distraction-free. Make the appraiser’s job easy by minimizing distractions and background noise. Have someone watch your children, keep away pets, and do whatever you need to do to make your home calm. This will ensure the appraiser is not in a rush and will have plenty of room to work.

• Clear up clutter. Technically, it shouldn’t matter whether or not your home is messy—but cleaning up before the visit may win you some points. Tidying up will make sure that every area is visible and accessible. To make your property look even more presentable, consider sweeping, mowing the lawn, and addressing spots of mold or water damage.

• Freshen up paint. This is an easy way to make your property look updated. Consider grabbing a paintbrush to freshen up both the interior and exterior.

• Point out hidden features. Appraisers are good at what they do. That being said, they might overlook features that aren’t obvious at first glance. Politely point out these features during the visit, including updated appliances. These may benefit your valuation.

What Not to Do Before Your Home Appraisal

You want to make your home look nice for the appraisal. That being said, you don’t want to prepare it like you would if you were selling it.

Don’t waste your time or wallet making big renovations. You don’t need to put in new floors or countertops just for an appraisal. Tidying up, touching up the paint, and making minor repairs should be enough. 

That being said, if you’re planning on having major repair work done regardless of the appraisal, it’s smart to have it completed beforehand. 

What if the valuation is too low?

Appraisers are certified professionals. They have plenty of experience valuing homes. And, because they have no stake in the outcome, you can trust that they’ll provide honest, accurate valuations—they don’t benefit from skewing the results in anyone’s favor.

There are a few cases in which their valuation might be off. If you get a valuation that is too low, you might not be eligible for refinancing. Luckily, you have the right to challenge the valuation.

To do this, write an appeal letter to your lender. You’ll need proof that the appraiser made a serious error (they noted the wrong square footage/room count, etc.). After appealing, you may need to pay for another appraisal or your lender may let you negotiate your refinancing rate.

The Importance of a Successful Appraisal

A bank considers factors like your income and credit history when deciding whether or not you’re eligible for refinancing and how much of a rate change you can get. Your home’s appraisal also plays an important part in this decision. That’s because the valuation assures the lender that they will be safe in case you default on the loan.

Because of that, it’s important to make sure you have a successful appraisal. By following these tips, you’ll have a better chance of getting a good valuation.

If you have more questions about refinancing and home appraisals, contact the Associates Home Loan of Florida today! Our team is ready to help by answering your questions and getting you started on the refinancing journey.