Should I Make Repairs To My Home Before It’s Appraised?

To Repair Or Not To Repair

appraisal repairsI received a phone call this week from a reader of my appraisal blog. They told me that they are getting a home equity loan and the real estate appraiser is coming out next week.

They wanted to know if they should make repairs to their home before the appraiser comes out. This is a common question so I thought I would share with you in this weeks blog post how appraisers handle homes that need repairs.

Two Perspectives

There are actually two ways to look at this situation. From the appraiser’s perspective, the appraisal value of a home will take into consideration its current condition including the repairs that need to be made which is known as an as-is appraisal.

The second perspective you should consider is that of the lender. Mortgage loans secured with an FHA mortgage typically have the reputation of being the most strict.

While conventional loans are typically less strict as to the condition of the property, that has changed in the last several years. Numerous lenders that I do work for request that the appraisal be done subject to repairs.

Even though it is possible to do the appraisal with the home in its current condition most lenders do not want this. They want the home appraised subject to the repairs being made.

Keep in mind that there are varying degrees of repairs. If your home needs some minor touch up paint that is different than making more substantial repairs.

FHA vs Conventional

Here is a good rule of thumb for deciding whether to make repairs. If the appraisal is for an FHA loan it’s a good bet that you need to go ahead and make the repair especially if the repairs affect the safety, soundness, and security of the house.

For conventional loans, if the repair could potentially affect the appraisal value of the home it should be done. Examples of this include broken or damaged items in the plumbing, electrical, HVAC or structural components of the house.

Do the heating and cooling systems operate? Are there roof leaks? Does the plumbing system have leaks? Are there sparks or charred marks on electrical outlets? Are there foundation issues? These are all examples of items that should be repaired before the appraiser visits the property.

“Subject-To Appraisal”

If they are not repaired the appraiser will make the appraisal subject to these repairs and they will need to come back out to the property to do a final inspection which will increase the time and cost.

Please keep in mind that the guidelines I have described so far are for appraisals performed for banks or mortgage companies. If an appraisal is done for a private party then repairs do not necessarily have to be made.

If there are repairs that will affect the market value of the house then the appraiser will take this into consideration. Due to the difficulty with estimating repair costs when there is no contractor estimate appraisers usually give a value for the property subject to the repairs being made.

Conclusion

The main takeaways for repairs are who the appraisal is being performed for and the degree of repair item. If you have a question about whether you should make a repair before the appraiser visit’s your home leave a comment below and as always, thanks for reading.

If you liked this post subscribe by email (or RSS feed).

Comments

  1. Nice job Tom. Like many answers we give, this really does depend on the situation. I find glaring condition issues ought to be cured if they’re blatant violations that will in no way pass for financing. Yet to be fair sometimes I’ve told owners to be ready to move on the repair very quickly if it is called out (it should be), but if it isn’t called out for some reason then you don’t have to do it. Some appraisers may not be as thorough as they need to be unfortunately. Right or wrong, that’s a real dynamic. Yet owners would still be wise to consider the market at hand. In my area there is actually a shortage of skilled labor, so waiting to do repairs can become a huge issue because of how difficult it is to find someone to do the repairs.

    • You bring up some very good points. Some appraisers may not note repairs that should be performed. I just did an appraisal where there was some peeling paint. The sellers had purchased the home last year with FHA financing and the appraiser did not catch it so it was still there. I have heard similar stories about skilled labor. It is very difficult to get things done on short notice so taking care of this ahead of time is critical.

  2. Agathe Gilles says:

    I want to refinance my home The mortgage company sent appraiser out the home value came back at 816,000.00. My loan is only 126K. The appraiser is requesting repairs to be made for 5000$.Is that is possible.?

    • Yes, that is possible. The appraiser’s job is to just report what they see. It could be the bank that wants the appraisal to be done subject to the repairs.

Trackbacks

  1. […] Should I Make Repairs To My Home Before It’s Appraised? – Birmingham Appraisal Blog […]

Speak Your Mind

*

Sign up and get valuable content!

  • Get local real estate market data
  • Learn valuable information from a seasoned appraiser
  • Find out what adds value to your home

I respect your privacy. Your information stays with me.