When it comes to refinancing, your lender will require an appraisal. A home inspection is sometimes confused with a home appraisal. However, the two are very different. A home inspection is done to determine the condition of a structure, whereas the aim of an appraisal is to determine the value of a property in its current or future (after renovations) condition.
Lenders will require that an appraisal be done on the property prior to loan approval so as to ensure that the mortgage loan amount does not exceed the value of the property. A real estate appraisal represents the expert opinion of a certified, state-licensed professional in respect of the value of a piece of property.
Function of a Home Appraisal
A professional appraisal serves to protect the buyer, seller and lender. The buyer knows he is not paying too much for the property, even if he considers it to be his dream home and would have paid thousands more for it. The seller received reassurance of home value in regards to the sales price. The lender is reassured that should there be a case of default, it will not be stuck with property that values less than the loan.
What Does a Home Appraisal Include?
A home appraisal will include details about the home, along with side-by-side comparables (comps). It will also provide an assessment of the overall real estate market in your area. The appraiser will comment on issues he feels are harmful to the value of the house, such as poor access to the property. He will also make notations about any seriously flawed aspects of the property.
Whether the reason for a home appraisal, homeowners can keep the following points in mind if their home is scheduled for an appraisal:
Rid your home of pests (signs of pests) and any old junk that you may have piled in the garage or on the front lawn.
Mow the lawn and trim back hedges to give your home some extra curb appeal.
Do not go wild with repairs and upgrades just for the sake of the appraisal. Some of these will not give an adequate return on the investment. Your safest bet is to focus on painting; carpeting; lighting and plumbing fixtures; cracked windows; missing handrails and structural damage.
If you have upgraded the house within the past 15 years, make a list of upgrades and supply it to the appraiser along with a sketch of the house. In addition, if there are any notable features on your property do not be shy to highlight them.
It would not hurt to mention any positive changes in the neighborhood. These might include anything from a new playground to the area being declared a historic or landmark district.