The Truth About Appraisals

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed. 

Getting Ready for Your Home Appraisal

Home appraisals are a necessary step in the process of selling or refinancing your home. While many homes today aren’t worth as much as they were when they were bought, it is crucial for homeowners to be realistic when it comes to getting their home appraised. 

If you are in the process of getting your home ready to be put on the market or interested in refinancing, the experts at Equity Mortgage Lending offer the following things to keep in mind as you prepare for your home appraisal. 

• The appraiser will need approximately 30 minutes to one hour to complete the inspection phase of the appraisal process, which includes: exterior photos of the front and rear of the home and a photo of the street in front of the property; measurements of the exterior of the home, garage and any outbuildings; a walk-through inspection of all rooms and levels of the interior of the home including the basement.
• Get organized. Put together a checklist that will help you get ready for your appraisal and get the results you're looking for.
• Be flexible when scheduling the appointment.
• Have a copy of your home’s blueprint to help verify measurements and lot size.
• Provide a list of improvements made to the property since the purchase. Improvements that should be noted include adding a pool, patio, updating your kitchen or bathroom and any room additions, etc.
• Allow your appraiser access to the entire property, including access to any crawl space or attic areas.
• Keep in mind that a clean home makes a good impression. Be sure to trim the lawn, clean the pool and garage, repair cracked windows or torn screens, check for leaky faucets and secure gutters and down spouts before your appraisal.
• Point out any amenities that may not be obvious to the appraiser: sprinkler systems, patios, pools, security systems, built in vacuum, etc.
• Provide a copy of last year's tax assessment information.
• Know what year the house was built and when improvements were made.
• The first thing appraisers look for is comparables, so be prepared and have a list of recent sales of similar properties in the immediate neighborhood.

By Paige Tepping

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An appraisal of a home is always supposed to be a fair, impartial and professional evaluation of a prop­erty's true value and not under pressure from special interests. The risk-management tool is designed to assure the owner gets a fair price, the buyer pays the right price and the lender's risk in making the loan is commensurate with the property's true value. Appraisers are typically hired by the lender to protect its stake in a home buying transaction. However, both the seller and the buyer can play a role in the appraisal process through a process of due diligence known as looking over the lender's shoulder. Continue reading.

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