How To Prepare For A Home Appraisal: 10 Best Tips

The appraisal is one of the more stressful points of a home sale. Home sellers feel they are unable to control the outcome of the appraisal. Here, I will help you better understand the appraisal process and share tips to increase your home appraisal value. Let’s start by getting you more familiar with how are homes appraised. I’ll conclude with some tips for how to prepare your home for an appraisal to increase home appraisal value.

What Is A Home Appraisal?

As a Realtor® I am frequently asked how do home appraisals work. An appraisal is the opinion of the market value of a property and verification of the property’s current condition. An appraisal is completed by an appraiser.

Many home sellers want to know if getting a home appraisal before selling would be beneficial. There is no benefit whatsoever to getting a home appraisal before selling. The only appraisal that matters is the one completed by the buyer’s lender by an appraiser within the lender’s appraiser pool. The only exception to this is if you are trying to sell your home FSBO and want to get the appraisal to help you determine the listing price and market value for your home.

What Do Home Appraisers Look For?

A home appraiser is there to verify the property’s condition and the property’s market value is equal to or greater than the contract purchase price.

Appraisal And Verification Of Condition

The first thing to know to understand how home appraisals work is to know the property must be in acceptable condition to place a mortgage. In the mortgage lending and appraisal world, the schema used is the C-Scale. Generally, lenders only lend on C1 through C4 homes.

• C1 – A brand new home that has never been occupied
• C2 – A home that has had a major renovation. An example would be nearly all major home components have been replaced; the home was truly gutted.
• C3 – A C3 is a home that is completely in suitable condition with no signs of neglect and has been lived in. 95% or more of homes fall in this category.
• C4 – This is a home that is a C3 but has some signs of disrepair or neglect is likely livable on the first day after closing the loan.
• C5 – The home is in disrepair and is unlikely livable on the first day. This could include situations such as the utilities are disconnected, the home is damaged, unlivable, and external elements are entering the home (i.e., pests, animals, weather, rain).
• C6 – A C5 but even worse. The home is in terrible shape and is simply not livable.

Special Note For FHA, VA, and USDA Mortgages

Appraisals for FHA, VA, or USDA mortgages follow this same condition scale. However, the appraiser must also complete a slightly more thorough inspection. With these loan types, the home must meet “minimum property requirements.”

Minimum property requirements focus on health and safety issues. If a health and safety issue is uncovered the seller or buyer must get it repaired in order for the appraiser to advise the lender to allow the loan to take place. Here is a list of common issues:

• Slip, trip, and fall hazards like missing handrails or guardrails,
• Peeling paint (yes, outside buildings like sheds and detached garages matter, too. And, this one remains true even if the home was built later than 1977 after the lead-based paint era),
• Open electrical receptacles or switches
• Active leaks and pipes in the roof,
• Broken windows,
• Doors that do not latch or exterior doors that do not lock

Appraisal And Verification Of Value

The appraisal is also designed to verify the home’s market value is equal to or greater than the contract purchase price. The appraiser collects information about the subject property and then looks for similar, recently sold homes nearby.

Here, I have listed the criteria to help you better understand how homes are appraised. Though the importance of each piece of data remains debatable, I have done my best to place it in what I believe to be a relatively reasonable order of importance.

• Location
• Number of bedrooms
• Number of bathrooms
• Finished square feet above ground
• Finished square feet below ground (think finished basement)
• Total finished square feet
• Home design (i.e., ranch, two-story, Cape Cod, split level)
• Year built
• Major features (i.e., garage, fireplace, pool)
• Lot size (generally, the house on 2 acres is not worth much more than the same house in the same area with the same features on 0.20 acres)
• Overall look, feel, condition, and aesthetic sentiment (yes, I am certain there is some subjective element involved)

How Long Does A Home Appraisal Take

The appraisal usually has two parts. First, the appraiser must physically come to the home and briefly tour it. This only takes about 15 to 20 minutes. As a Realtor® familiar with Indiana home appraisals I can share with you the norm is that the buyer is not present when the appraiser walks through the home. With an FHA, VA, or USDA and its added verification of minimum property conditions, the appraiser may be at the property for 30 to 40 minutes.

The second part is the report. I usually do not begin inquiring about the appraisal report until 7 to 9 days after the appraiser has visited the property.

An additional frequently asked question is how long does a home appraisal last? The answer to this depends on the type of loan.

• Conventional or insured conventional loan: lender dependent, but generally 90 days to 6 months
• FHA loan: 120 days from the date of appraisal
• VA loan: 6 months from the date of the appraisal
• USDA loan: 150 days from the date of the appraisal

How Much Does A Home Appraisal Cost And Who Pays For It?

A home appraisal costs between $300 and $600. The average cost of a home appraisal is likely to close to $450. As an Indiana Realtor®, I can tell you this is how much I routinely see charged for home appraisals in Indiana. Homebuyers using an FHA, VA, or USDA loan are likely to pay a higher rate. This is because the appraiser must have more experience and additional credentials to complete these.

And, this leads to the next topic of who pays for the appraisal when buying a home. Buyers almost always pay for the appraisal. Additionally, this is almost always paid outside of closing.

10 Tips For Preparing For A Home Appraisal

As a Realtor® I have learned a thing or two about preparing for an appraisal. These home appraisal tips are here to tell you how to prepare your home for an appraisal and effective actions for increasing your home appraisal value. I have also included a downloadable home appraisal checklist to prepare for a home appraisal.

1. Don’t Get Your Own Appraisal

First, getting an appraisal before selling your home is a waste of time and money. The only appraisal that matters is the one ordered by the buyer’s lender. Instead, let’s focus on what to do regarding the appraisal that does matter.

2. Cut The Grass

The outside of your home should be well kept. The outside is the appraiser’s first impression of your home. Additionally, the appraiser is going to walk around the yard to view it and the home’s exterior. Make sure the yard is free of any trip and fall hazards. Clean up any dog mess in the yard, too. You wouldn’t want to ruin the appraiser’s day by having him or her step in a pile of doggy-doo.

3. Clean Your House

Cleaning your home is the best thing to do before a home appraisal. Treat the home appraisal like it is the most important showing because at this point it is. You want the appraiser to have a pleasant experience while appraising your home. This means your home should be neat and clean with everything in its place. No dirty laundry, dirty dishes, or overflowing garbage cans.

4. Staged To Sell

Using what you have, make the space inviting, warm, and desirable. Just like when you were showing the home you want to have a high aesthetic sentiment in the home. This is the feeling of positive vibes you get from seeing and being in a space. Have the lights on, doors open, and the shades and drapes up and open. Do whatever staging you were doing for showings, too.

5. If It’s Broken, Fix It

It is likely by the time you have an appraisal you have already had an inspection and may have agreed to fix some items. For this section, I am talking about fixing open and obvious items. A door handle, a light switch, or some other common item that any visitor would see. If you’re trying to get the top dollar for your house, make the effort and fix anything openly and obviously not working correctly.

6. Easy Access

All parts of the home should be easy for the appraiser to access. This includes scuttling hatches into attics. Some appraisers are more thorough than others. Some loan types require a more thorough review of the home, too. Again, you want the appraiser to have a pleasant experience in your home. Don’t make the appraiser have to figure out how to access parts of the home.

7. Be A Wallflower

If you decide to be home and present during the appraisal try not to interfere. Guess what…it’s not the appraiser’s first day. He or she knows what to do. The appraiser does not want you to take them on the dime tour, talk their ear off, or anything else. Be courteous and just let the appraiser complete the task at hand.

8. List Meaningful Updates

Home appraisers do care about meaningful updates, and these will increase your home’s appraisal value. Communicate these updates by leaving a list of updates where the appraiser will find them. Note to the appraiser that he or she can take it with them. Also, include invoices for the work.

The careful part of this comes here. The appraiser really doesn’t care that you bought a $50 bag of grass seed and put it on the lawn last year. Instead, focus on more meaningful items. A recent kitchen or bathroom remodel, a new roof, new HVAC equipment, a new water heater, a recent interior or exterior paint job that covered 50% or more of the home. These are meaningful updates that can push the value needle upward. Include invoices if you have them. Do not put down budgetary figures from work you did yourself or estimated values.

9. Make The Appraiser Aware Of Multiple Offers

Let the appraiser know if your home received multiple offers at the same time. If you are working with a real estate agent your agent will most likely take care of this for you. If you are selling your home FSBO print out the other offers and leave copies of those for the appraiser.

10. Don’t Run Comps Or Provide Examples Of Comparable Home Sales

I’m going to keep this really short to prove my point.

How about I show up at your job tomorrow and tell you how to do it despite the fact I have never done your job for a day in my life? That doesn’t feel good, does it?

Yep, that’s what I thought. Don’t try to run comps and give those to the appraiser.

Can I Appeal An Appraisal?

Yes, home sellers can appeal an appraisal, but there is no judge and no jury. At the end of the day appealing an appraisal is basically telling the person who did the work that he or she did so incorrectly. This is the person with whom you are arguing. Good luck with that.

Here is what you can do if the appraisal is less than the purchase price.

Option 1 – Appeal For An Appraisal Revision

When there is a missed appraisal you should be provided with the appraisal report. Review it and look for any errors. Specifically, are the homes used as comparable homes actually similar to your home? Additionally, are there other, more comparable properties nearby which have recently sold? If so, the appraiser could have made an error. You or your real estate agent can put together a brief report to send to the appraiser to present additional information. This may result in an appraisal revision.

Option 2 – Negotiate A New Price

Home sellers can negotiate with the buyer to cover the appraisal gap. Buyers can cover an appraisal gap with cash and still get the loan approved. You as a home seller need a buyer who has cash. One way to be aware of your buyer’s cash position is by knowing if they are making a down payment greater than the minimum down payment for their loan type.

Option 3 – Lower The Price

The fastest option to continue to make progress is to sell the home for the appraised value by amending the purchase agreement. Home sellers taking this option can potentially recover some of the lost proceeds incurred by lowering the price. First, negotiate with the buyer to not complete any repairs not yet completed. Secondly, claw back any closing cost allowances you gave the buyer.

Option 4 – Punt And Fall Back By Re-Listing The Home

Yes, starting all over and re-listing the home is an option. Yes, as a real estate agent I have seen an appraisal miss on valuation, get re-listed, and a new appraisal produces a different result. Remember, an appraisal is nothing more than an appraiser out there giving it his or her best effort. The next appraisal could be better.

When re-listing, it is important to know that appraisals for certain loan types will stick with the property for a period of time. This is true for FHA and VA loans. Therefore, if your buyer was using one of those loan products you will want to eliminate those financing types until the original buyer’s appraisal expires.

Conclusion

A home appraisal is an assessment of a home’s condition and market value. This assessment is usually ordered by the buyer’s lender and is completed by a licensed appraiser selected by the lender. The homebuyer pays for the appraisal.

Home sellers can increase their home appraisal value by taking steps before the appraisal occurs. This includes putting the home’s best foot forward by cleaning the home, having the exterior looking well-kept, and staging the home to be attractive. Additionally, make the appraiser’s job easy by making it convenient for him or her to schedule the visit, get in the home, and access all areas of the home. Think of the appraisal as the most important home showing during the home sale process.

Home sellers have four options when a home’s appraised value is less than the agreed-upon purchase price. You can appeal that the value is revised, negotiate with the buyer to close the gap, lower the purchase price to the appraised value, or start over and put the home back on the market.

Home sellers working with an experienced Realtor® are less likely to suffer from an appraisal surprise. This is because a skilled real estate agent will price your home reasonably within the marketplace and talk about appraisal risks before you are that far into a home sale transaction. If you are thinking about selling a home in Indiana feel free to contact me. I can help you and offer some of the lowest real estate commission fees in Indiana for a full-featured home selling service.

About Quadwalls®

Quadwalls.com is a real estate website founded by Indiana Realtor® Chuck Vander Stelt. Chuck and his team of Quadwalls Connected Agents are committed to helping home buyers and sellers save money and make better decisions when buying or selling real estate.