The meaningful to a Successful Refinance: The House Appraisal
When you are refinancing your mortgage the appraisal is the most important part of the time of action. You want the value of your home to come back as high as possible in order to make the loan to value ratio as low as possible. If your appraisal value puts your home equity at less than 20%, the higher the amount of equity in your character (the difference between the home’s value and your mortgage balance) the more competitive the interest rate you are likely to get since lenders consider borrowers with more equity to be less risky. If you are refinancing your mortgage you need to understand the home appraisal’s basic role in the time of action.
What Is a Home Appraisal?
An appraisal is an opinion of a home’s value provided by a third party who is qualified to provide this opinion. The appraiser gets paid for providing the service of valuing your home. In a refinance transaction, the appraisal protects the mortgage lender by ensuring that it doesn’t provide a loan of more than the character is worth. If the character later goes into foreclosure or strength of sale for any reason, the lender wants to be able to resell the character and get its money back.
The appraiser will contact you to schedule the appointment and often their visit to your home will be between 30 and 45 minutes to tour by the whole house and take pictures and notes on the finishes and condition, measure its dimensions, and estimate its overall condition both inside and out. The appraiser will then go back to his or her office and conduct research on your character, the legal description, the lot dimensions, sales history, etc. and then he will search for adequate comparables. Ideally the appraiser will be able to find comparable sales that took place in your immediate neighbourhood in the past 3 months. Based on the home visit and these records, the appraiser arrives at a specialized opinion of how much your character would sell for if you put it on the market. The mortgage lender then uses this value, along with your income, assets and credit history – to determine how much it will lend you and at what rate.
How Home Appraisals Work in Today’s Market
The lender or mortgage broker often will order the appraisal by a third party called an appraisal management company (AMC) or contact the appraisal company directly. Many lenders have direct referral relationships with a small panel of appraisers and don’t use an AMC. Or the lender may have an in-house independent appraisal department. The appraiser should have local knowledge of the area (called market competence). Appraisers are expected to follow the Uniform Standards of specialized Appraisal Practice issued by their Appraisal Foundation.
Home Appraisal Fees
Residential home appraisal fees vary based on the size of the home and other factors, but typically you should expect to pay $250 to $400 for an appraisal of a standard single-family home. More complicate similarities are more expensive because the inspection takes more time.
You may be required to pay the fee up front at the time of the appraisal or in other situations it will be paid for from the proceeds of the mortgage refinance, in spite of of whether your loan closes, the appraiser nevertheless did the work and needs to be paid. While the fee may seem worthwhile if it enables you to get the refinance terms you want, it can seem like a waste of money if a low appraisal method you can’t refinance.
An option is to ask a real estate agent to do a comparative market examination and provide you with printouts of recent comparable sales from the Multiple Listing Service, taking this step could potentially save you hundreds of dollars by saving you from wasting your money paying for an appraisal if the value is too low to refinance.
Improving Your Chances of a High Appraisal
The value the appraiser gives your home largely depends on the recent sales prices of comparable similarities, but there are definitely steps you can take to help obtain a higher value.
The biggest thing is making sure your character is neat and clean, uncluttered and easy to inspect. Any pets should be contained and smells masked. Ensure your appraiser feels comfortable in the home and can focus on taking in all the features of your home. Having a dirty or unkempt home definitely will give the appraiser a bad first impression and will make the home appear in poorer condition than it truly is.
The biggest thing an appraiser takes into account is:
exterior and interior condition total room count functionality, including interior room design and layout, and functional obsolescence improvements to kitchens and baths, windows, the roof and the home’s systems (heating, electrical and plumbing) over the past 15 years that make the home more up-to-date, functional and livable by today’s standards condition and age of the home’s systems exterior amenities such as garages, decks and porches location unappealing features, such as an exterior turn up that’s inconsistent with the rest of the neighborhood
It’s a good idea to create a list of your character’s features to provide to the appraiser when he or she arrives.
Getting a Second Opinion on a Low Appraisal
A lot of homeowners are not realistic about their home’s value, there is definitely an emotional factor that can rule to the homeowner thinking their home is worth more than reality, however there are definitely situations where the appraiser may have determined a final value that is on the conservative side and this may sink your refinance.
Keep in mind an appraisal is just one person’s opinion, the appraiser should be well trained and educated, however as with all professions, there are good and bad practitioners.
If the homeowner does not like the value of the appraisal, they can write a letter of allurement to the lender or AMC, but the chance of an appraiser changing his or her opinion is very slim, unless the homeowner has overwhelming evidence that the value is off.
You may be able to make a case by pointing out that the comparables used were in an inferior school district or an inferior subdivision, or that they have other negative influences affecting value, such as being on a busy street.
The Bottom Line
Understanding how the appraisal course of action works will give you the best chance of getting an appraiser to assign the highest possible value to your character. Appraisals don’t always come in at the values borrowers hope for, and they are a human course of action with room for subjectivity and mistakes. You can allurement a low appraisal, but you’ll only succeed with strong data to back you up.