You’re so close to closing.
You’ve agreed on price, a move-in date and a million other tiny details necessary for the buyers to take possession of this property.
You’re ready to move on. Literally.
The only thing that stands between you and a sale is the appraisal.
After being under the microscope at open houses and inspection, you may wonder: What’s the point of this final examination? And, what’s it going to take for your home to pass?
Here’s our cheat sheet with the answers you need to ace your appraisal.
Before the appraiser comes: Checklist 1 (Do your homework)
1. Understand the role of an appraiser
According to the National Association of Realtors® Research Group’s 2021 data, 64% of buyers have conventional loans, 16% have FHA loans and 14% received VA loans.
After you accept an offer, the buyer’s mortgage lender typically contacts a third-party appraisal management company (AMC). A residential home appraiser’s job is to provide a professional opinion of your home’s value so the lender knows that the house is worth at least what the buyer asks to borrow for the purchase.
This protects the lender in case the buyer later defaults on their mortgage and the lender has to foreclose on the property.
“The appraiser is simply a third-party professional who comes to the property to make sure the bank is lending on a property that is actually there, has the size and features (bedrooms, baths, etc.) described and compares to the values in the area,” explains top Los Angeles agent Keri White, who is also a home loan, title and escrow specialist.
All states require appraisers to be licensed and certified to provide appraisals for federally certified lenders.
In addition, the Appraisal Institute offers its advanced credentialing of members such as MAI, SRPA, SRA, AI-GRS and AI-RRS designations in residential real estate.
Since many lenders process a high volume of loans all around the country, local appraisers provide first-hand verification of the property’s condition. “I am the eyes and the ears of the lender,” explains Warren Boizot III, SRA, a state-licensed appraiser with 24 years of experience in Denver, Los Angeles and Las Vegas.
To conduct an accurate evaluation, the appraiser will evaluate local comparable sales and conduct an onsite visit of your property to evaluate an array of external and internal factors.
During your home visit, an appraiser evaluates the condition of your home by assessing upgraded features and materials, its location, the value of other comparable homes in the area as well as other factors.
Additionally, lenders often rely on appraisers to make sure the property meets certain minimum requirements. For example, to be eligible for U.S. Federal Housing Administration (FHA), Veterans Administration and other government-subsidized loans, properties must meet very specific, uniform criteria.
The appraisal is usually the last piece of the loan package to be completed before closing.
So, anything a seller can do to make sure the appraisal goes well contributes to an on-time closing and smooth sale.
2. Be flexible in scheduling
In this booming housing market, the turnaround time between appraisal request and report deadline are sometimes less than 30 days. For sake of time efficiency, many appraisers group appointments by geographic location.
Appraisers realize homeowners are busy, but, if a seller is only available on the weekend, “It sure cuts down the amount of time I have to finish that report,” Boizot says.
And, it pays to be flexible. Even if a closing delay doesn’t risk the sale, it can be a huge inconvenience, says Richard Helali, mortgage lending expert with HomeLight Home Loans, “Maybe the seller needed the money to close on their other home or the buyer had already set up the moving truck and now they have to reschedule everything.”
So, rearranging your schedule can save valuable time.
3. Research your home’s value
If you’d like to be certain the appraiser has the most up-to-date information to support your listing price, be sure to pull the documentation that led you to determine that figure. Here are a few resources you might want to consult:
- Online tools to check your asking price: HomeLight’s Home Value Estimator is an example of a handy online tool that can provide some help researching your home’s value. Home value estimators use information from multiple sources to provide a ballpark estimate of your home’s value based on current market trends.However, the algorithms these estimators use can’t measure every detail like an appraiser can, such as recent upgrades that the tool didn’t include in its calculations. When you answer our seven-question quiz, we can predict your home’s current value with greater accuracy.
- Comparative Market Analysis, or CMA: This is a resource that your agent used to help determine your asking price. A CMA involves examining about 10 “comps,” or properties that are comparable to your home in size, location, and amenities, such as a swimming pool.
- Pre-listing appraisal: In the San Francisco Bay area, pre-sale appraisals and inspections are common. “Because they know what appraisers are looking for, home inspectors or even experienced agents can flag issues that impact an appraisal and make sure the property is finance-able,” Helali says. “You can use that inspection report to take care of things that should be done before the property is marketed.”
4. Create a home fact sheet
Even though appraisers can’t use most information that’s more than three-months-old, a previous appraisal, blueprints or a sketch is evergreen. And, while the appraisers definitely take their own measurements, the documents can provide a benchmark as well as valuable zoning information and other details.
Also, because the appraiser is looking to document features that add value, a list of itemized upgrades including the dates and materials contribute to an accurate appraisal.
For example, “It can be hard to tell the difference between quartz and quartzite countertops (a man-made, less expensive stone) just by looking,” says Megan Suarez, a Regions Bank mortgage loan officer in Baton Rouge, Louisiana. “Without a list, the appraiser might not notice.”
Believe it or not, the cost of materials is usually immaterial. That’s because “You can’t always expect to get dollar-in for dollar-out,” Suarez says. For example, a landscaped pool may cost $50,000 to $80,000 but only add $10,000 to $20,000 to the value of the house based on the neighborhood.
However, Boizot says, “Don’t forget to include the non-glamorous but just as valuable upgrades such as roofs, water heater, furnaces, photovoltaic solar systems.”
Other relevant paperwork or digital documents include:
- The most recent tax receipt
- Any homeowners association or condominium covenants and fees
- Information about nearby schools and walkability
- A list of major home improvements and upgrades, including the date of their installation, cost (include receipts), and permit confirmation (if available)
5. Make minor repairs
“The appraisal is really about the value of your house — not about repairs,” says White. “However, we advise sellers to make repairs before the appraisal comes to avoid having the appraiser come back.”
Since White knows the issues commonly flagged by appraisers, she goes on a walkthrough with each client and proactively recommends they repair peeling paint, chipping or damaged roof tiles, structural or foundation issues resulting in cracks along the stucco, walls or elsewhere, plumbing issues indicating leaks or a broken pipe, exposed wiring, missing or damaged outlet plates, rotting wood, missing major appliances, faulty doors and locks and the source of moisture problems and any related stains.
And, while most of these problems alone aren’t a major issue, what appraisers are really looking for is a pattern of neglect. “If I go into a house and there’s a broken window or missing outlet covers [and] the agent hasn’t thought that’s important to fix it for the showings,” Boizot says, “I wonder: What else have they neglected?”
If you don’t have to complete or even begin a repair before the appraiser arrives, it’s helpful for the seller to provide an estimate of what it will cost to cure. That way, the appraiser can proceed as if the roof were fixed and deduct the cost. Otherwise, the appraiser may note the home needs a structural engineer or estimate a different cost. If the seller provides a $2,000 bid, they may preempt an appraiser’s $20,000 estimate to fix the same problem.
6. Make sure everything is easily accessible
During their short visit, appraisers have a lot of ground to cover. That includes the crawl space under the house, basement and the attic. Sometimes the entrances to those areas are in closets or covered by overgrown bushes.
“Many lenders want a picture of the access to the crawl space or attic, which might be under a beautiful display of shoes in the primary closet” says Boizot. “If you’ve cleared that area, it’s super helpful because then I don’t have to move your personal items.”
You don’t have candles and cookies. But, you want it to look like it’s valued at top dollar.
- Keri White Real Estate AgentCloseKeri White Real Estate Agent at The Agency Currently accepting new clients
- Years of Experience 17
- Transactions 250
- Average Price Point $2m
- Single Family Homes 122
When the appraiser arrives: Checklist 2 (Appraisal Day Etiquette 101)
1. Tidy up your home for its final photo shoot
To prepare her clients for an upcoming appraisal, White advises sellers to have the home looking ready for an open house. “You don’t have candles and cookies,” she says. “But, you want it to look like it’s valued at top dollar.”
Boizot agrees creating an ambiance isn’t necessary, but having a ladder available for the appraiser is much appreciated.
The reason appearance matters is “Most conventional lenders use Fannie Mae and Freddie Mac guidelines that require photos of the kitchen, every bathroom, bedrooms, main living area, front view, street view and rear view of the home,” Suarez explains.
Those photos are often reviewed by “underwriters in a cubicle that are sometimes thousands of miles away,” Boizot explains. The underwriters use the photos to verify the appraiser’s description. “So, if that morning’s breakfast is strewn across the countertops,” he says, “sometimes it’s hard to tell what kind of material is under it.”
If you’re feeling ambitious, review our comprehensive deep cleaning checklist so you don’t miss a spot.
Based on her nine years of experience reviewing thousands of loan application photos, Suarez says, “If I were going to advise someone to do one repair to improve value, it would be fresh paint inside and out,” Suarez says. “Particularly on an older home, fresh paint makes a world of difference.”
2. Be available but not intrusive…or not there at all
Owner and agent appraisal etiquette is a delicate balance between being available with documents and answers to questions and staying out of the way. And, if you work with an agent, consider leaving yourself.
Although all appraisers have their own methods, Boizot typically walks through the home four times to complete different components of the appraisal — measurement, photographs, notes and review for accuracy. On one pass, he encourages the owner or agent to accompany him to highlight unique features and improvements. It also presents an opportunity for the owner or agent to present any special comps or information to make sure it’s pertinent for consideration. (But, if the appraiser declines to use the information, please don’t argue.)
3. Minimize health risk
In a time of constant COVID mutations circling the globe, you can minimize risk by creating a contactless environment. Even though he wears a mask, “If I had a homeowner who opened all of their doors in closets and bedrooms and turned on all the lights, I literally could go into the house and not touch a thing,” says Boizot.
4. Secure pets
Depending on your property’s condition and size, the appraisal process can be a quick 15-minute visit or a two- to three-hour examination. To ensure that any pets aren’t in the way — and don’t inadvertently get loose — secure your pets in a kennel in a room, or take them out for a playdate or a puppaccino.
5. Avoid discussing your need for the appraisal to come in at a certain amount
While you present the appraiser with information — especially during a refinance, it can be tempting to casually talk to the appraiser about the amount a friend said your home should appraise for or how much you need it to be in order to pay for a vacation, medical care or a new home.
As an independent contractor, an appraiser’s job is to present an impartial assessment. “I am not swayed by any of the parties involved in this transaction — owners, agents or the lender.”
So, talking about your home’s value only creates an uncomfortable situation.
After the report is ready: Checklist 3 (Review Your Results)
1. Realize disappointing reports aren’t destined to be deal-breakers
The National Association of Realtors® Confidence Reports shows appraisal issues in October 2021 accounted for 25% of delayed contract settlements and 13% of terminated contracts.
People make mistakes. An appraiser’s measurements might record a home as 1,800 square feet, but the county property records and builder plans list the home as 2,000 square feet. Your agent can submit that information and request the appraiser change their valuation.
Another issue may be that a comparable property the appraiser used turned out to be a distressed property, foreclosure, or short sale. Again, your agent can research why that price was much lower and provide supporting data, including some comps or multiple offers that reflect a normal or high market value.
2. Consult with your agent regarding your next move
Fortunately, White says, “99.9% of the time appraisers are not asking for repairs on properties on either side of the transaction.”
In fact, she says, “Most times, the sticking point with appraisals isn’t the repairs. It’s the value.”
Sometimes an appraisal report has no errors and comes in under value anyway, such as in a situation with multiple offers and lots of demand. Your agent can speak to the lender and ask about resubmitting comps to support the agent’s calculations.
Your best option is to consult with your agent and have him or her negotiate with the buyer about how to handle the difference.
“When we’re in this situation, it’s very stressful on both sides,” says White. “Even if the sellers have backup offers, you never want your buyer who’s in escrow to have to deal with a low appraisal because they have to walk away from the deal.”
Because of the strength of the current sellers market and low inventory, “If they’re putting down 20%, then buyers usually always want an appraisal review,” White says.
If buyers put down more than 20%, “They’re typically not too concerned the appraisal came in low because it doesn’t impact their loan or rate,” says White. “They know the values in the area and feel confident moving forward.”
Most of the time, “The buyers figure a way to make it work by putting more money down or trying to find a different loan option because they don’t want to lose the house,” White says.
3. Cinch and celebrate the closing
By following the steps in these checklists, you can significantly increase your chances of having a successful appraisal and closing.
One of the keys to success is having an experienced real estate agent on your team. Agents know how to navigate the appraisal process and how to press through any unexpected waves that could steer the sale off course.
A top-rated agent also helps you get top dollar for your home. Our data shows the top 5% of real estate agents across the U.S. sell homes for as much as 10% more than the average agent. HomeLight’s Agent Match tool analyzes more than 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
For more handy tips, how-tos and seller insights, check out these other HomeLight stories:
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