So, What Does an Appraiser Look For During a Home Appraisal?
If you’re an agent or a home seller and you’ve ever asked, “What does an appraiser look for during a home appraisal?” this post is for you.
I get asked a lot by both agents and sellers about what they need to do to prepare for the appraisal. There is some information on this topic available on the internet, but it’s pretty generic. In this post, I want to show you how to prep for an appraisal without worrying about things that are unnecessary and don’t even matter to the appraiser. If you have any questions, please leave a comment below or give me a call. I’d be glad to talk with you about it.
Why the Appraiser Walkthrough Gets Overcomplicated
Most people worry about the appraisal because they are not sure of exactly what the appraiser will be looking for. The number one concern I come across is about the house being messy, and it’s usually the wife who is worried about this.
While a cleaner house does present better, it is not the main thing the appraiser is looking for. We are trained to look at the structure of the house and not the laundry lying on the bed.
The appraiser’s main goal during the visit is to observe the features and condition of the house, so it can be documented in the appraisal report as well as verify things about the house that are required by the lender and Fannie Mae or HUD (FHA).
What the Appraiser Is Actually Trying to Do
When the appraiser is at the property, they are trying to accomplish several things. As I noted previously, the main goal is to observe and document what we see.
This includes measuring the house to get the accurate square footage. This is very important since the size of the house is one of the main considerations when both pricing it and valuing it. We also look at the functionality of the floor plan to see if there are any design flaws that could affect its marketability.
We look at the condition of the house, including any deferred maintenance. This is especially important for FHA/HUD appraisals because they typically have stricter guidelines than conventional appraisals. We also have to consider any secondary requirements that lenders may have in addition to those of the GSAs.
During the appraisal inspection or observation, we also note the quality of construction. This includes the type of materials used, such as exterior siding, hardwood, tile, crown molding, whether laminate or quartz counters, the type of windows, etc. Other quality-related features include ceiling height, trim, and outside features like pools or landscaping.
Most lender clients require the appraiser to take photographs of every room in the house. In addition, we are required to photograph any part of the house that has deferred maintenance or requires repairs.
These photos, along with the narrative description in the report, help the lender understand more about the property and provide support for their opinion of value. The photos can also help the appraiser have a record of the property to aid in comparing it to the sales included in the report.
What Really Matters
Size, Layout, and Function
As I noted previously, the appraiser measures the home and observes the floor plan layout. This information can help them compare it to other homes in the market, and especially the ones used in the report as comparables.
A home that is either much smaller or larger than most others in the market may indicate that it is either overbuilt or underbuilt, which can affect marketability. When the floor plan layout is compared to other typical homes in the area, it may reveal that it has functional problems. A home with only one bedroom when most others have three may be more difficult to sell, which will help the lender make a lending decision.
Condition and Repairs
The appraiser is not a home inspector; however, we are required to report what we can readily see. Foundation cracks, holes in walls, a leaking roof, or electrical burns on outlets all point to issues that directly affect the property’s value and something the lender will need to know to make an informed underwriting decision.
Some of the repairs may be cosmetic in nature and not require much to correct; however, more serious issues like foundation cracks can significantly lower the value of a home. Again, these are all issues the lender must know to make sure their collateral is worth the money they lend on it.
Updates
An important part of the appraisal inspection is finding out about any updates or renovations that have been made to the house. Some updates are obvious; however, there are some that may not be readily apparent.
Renovations to the kitchen, bathrooms, or other “visible” parts of the house are easier to observe than, say, updates to the plumbing or electrical system. Other areas that fall into this category could also include a new roof or HVAC system. Although items such as these are expected to be functional and may not contribute as much value as a new kitchen or bath, they do influence the property’s effective age.
It’s important to keep in mind how well any new improvements are made blend with the rest of the house. A change in quality or workmanship may erase any increase in value if the improvements are not consistent with the existing structure.
Site and Location
So far, we have only talked about the house itself; however, when we are at the property, we also look at the site. Some of the things we look at include the lot size, topography, access, and location.
We note if it is in close proximity to a busy road, airport, railroad, or any other positive or negative influences. There’s not a lot you can do get the lot ready for the appraisal other than improving its street appeal. Any negative factors related to the site’s location are typically considered external depreciation.
What Usually Does NOT Matter Nearly as Much as People Think
Housekeeping
This is the number one question most people ask about. They want to know if it “counts off” if the house is messy. The short answer is no.
Appraisers are trained to look past the messiness and look at the structure of the house. With that being said, there is a certain point when messiness can turn into the house just not being maintained and taken care of. When it reaches this level, the appraiser may question whether the bigger systems of the house have been taken care of.
The house does not have to be staged, but the condition should not make the appraiser question whether the home has been well-maintained. There is a difference between this and some laundry lying around or dishes in the sink. Also, appraisers are not looking at furniture or how the house is decorated, as this does not influence the appraisal value.
Helpful Checklist
For Seller
- Make sure everything is accessible
- Replace burned-out bulbs (if lights don’t work, it can make the appraiser question the electrical system)
- Fixing anything can affect the occupant’s safety
- Straighten enough for access, but not a photo shoot
- If possible, provide a list of updates and renovation-the cost is not necessary, but if you have it already,y include it
For Listing Agents
- Listing packet with comps from your CMA, list of updates/renovations, survey if available, HOA info, and any other info you used in pricing the home
- For FHA appraisals, make sure all utilities are on, or the appraiser will need to make another trip, which will cost the borrower extra
- For FHA appraisals, make sure all repairs that affect the safety, soundness, or security of the property are completed
- Make sure there is access to the attic and crawlspace
A more thorough list can be downloaded by clicking the image. This list will aid agents and sellers in preparing for the appraisal inspection.
While you can meet the appraiser at the property, it is not necessary. The information noted above can be emailed or left at the house.
You can let the appraiser know that you have included the sales you used in your pricing strategy. Anything more than that is not necessary, or it could be misinterpreted as trying to influence value.
Common Mistakes
In my 30+ years as an appraiser, here are some common mistakes I have seen sellers or agents make:
Not making repairs- In the past, FHA appraisals were usually the ones with more strict guidelines; however, lately, I have seen lenders requiring similar repairs to be made to conventional loans as well. It’s important to get these taken care of before the appraiser looks at the house, or the appraisal will be made subject to repair and a final inspection, which will cost extra.
Trying to “sell” the appraiser on the property– It has not really happened too much with me, but I have heard other appraisers tell stories of agents who try to “sell” the home too much. As I noted, this can be construed as pressure, which is a big no-no.
No Communication- It’s important to communicate with the appraiser if they have any questions before they submit the appraisal. If you don’t, and the value is lower than the contract, you will have to go through the lender, which usually takes longer and can delay the closing. Be available to answer any questions they have, but don’t talk about value.
Conclusion
The bottom line is that the appraiser’s goal is to get the most accurate information about the property. If you’re wondering how to prep for an appraisal, it really comes down to access, condition, and clear information about updates and renovations.
If you’ve ever asked, “What does an appraiser look for during a home appraisal,” I hope this helped. If you have any other questions, feel free to reach out. As always, thanks for reading.
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