Whether you’re a first-time seller or a seasoned pro, the appraisal process used to determine your home’s fair market value can be a little intimidating. Lenders require the appraisal to ensure they’re not loaning the buyer more money than the value of the home.
So if the appraisal comes in lower than the sale price, your buyer will need to come up with the difference in cash or negotiate to lower the sale price. And if you can’t reach an agreement, your buyer can walk away from the deal thanks to their appraisal contingency.
Still, Lonnie Heward, a certified appraiser in the Phoenix-metro area with over 20 years of experience, emphasizes that an appraisal is nothing to worry about: “The process is a lot of common sense. We don’t do any magic . . . All an appraiser is, is a glorified reporter. All we do is collect data, put it together in a report, and give it back to you.”
The appraiser aims to fairly and impartially determine your home’s value. While most of the appraisal process is out of your hands, there are tangible steps you can take as a seller to ensure a fast and accurate appraisal. We spoke with several appraisers and a top real estate agent to bring you the thirteen best home appraisal tips for sellers.
1. Choose the best offer on your home (hint: it’s not always the highest)
The offer you choose may influence the fate of your home appraisal. For example, if you sell to a cash buyer, they may waive the appraisal contingency and entirely skip the appraisal. In a strong seller’s market, a buyer may offer to make up the difference between the appraised value and their offer in cash to close the sale.
Mark Deering, a top real estate agent in Grand Rapids, MI, shares, “in this hot market, we see six to 15 offers on a home, and each offer has 30 items that can be negotiable. There’s a lot of variables, and you might not even pick the highest price offer if there’s another one that just has better terms and less contingencies.”
Lean on your real estate agent’s expertise and experience to choose the best offer for your selling goals. If you choose an offer with an appraisal contingency, review the deadline to ensure it’s reasonable.
2. Partner with a real estate agent who knows how to round up comps
When an appraiser calculates your home’s market value, it all comes down to how your home stacks up against comparable properties. Comparable properties, called “comps,” are homes recently sold in your area with similar characteristics to yours in terms of square footage, number of bedrooms and bathrooms, amenities, and overall condition.
If you partnered with a top agent, they would have considered comps when setting your home’s listing price. So as long as your home sells for close to listing price, there shouldn’t be any surprises when the appraiser comes around. Deering emphasizes:
“Your agent did a good job of coming up with market value when you listed it . . . so the appraisal is just a formality. The appraiser is just reassuring the bank that’s financing the mortgage that yes, they’re paying $250,000 and yes, it’s worth $250,000.’”
Now, say you’re selling in a competitive market where prices are on the rise and your home sells for well above the listing price. In this instance, your agent will need to justify why the high sale price is fair market value by. To do so, they can round up the comps for the appraiser and indicate why your home is of equal or higher value to them.
Rachel Massey, a certified appraiser based in Ann Arbor with over 30 years of experience, says that the effectiveness of this strategy depends on the appraiser:
“Appraisers are individuals, just like agents are. Some will appreciate the ‘sales’ that are provided. It is up to the appraiser, however, to determine if the sales are ‘comparable.’”
3. Compile a detailed list of recent upgrades
While the amount of work and money you put into your home is obvious to you, it may not be obvious to an appraiser. Help them out by providing a detailed list of the upgrades you’ve completed in recent years. You’ll rarely see a dollar for dollar return on your renovations, but they may help boost your home’s overall value.
Angela Miller, a certified appraiser in the Tidewater, VA, with over 25 years of experience, shares that the market also dictates how much value renovations add. For instance, she recently appraised a condo that sold quickly thanks to a hot seller’s market. Although this condo was far more dated than a recently remodeled condo in the same area with a new kitchen and bathroom, the condo only sold for $4,000 less. “I was floored,” she says, but that was what the market valued it at.
4. Round up relevant home permits for renovations completed during ownership
After you’ve cataloged the upgrades for your home, collect the permits for any projects that required them. Not all appraisers will follow-up on these details, but they can ask you for documentation or consult public records if they’re particularly diligent or suspicious about a code violation. By providing proof that your renovations are code-compliant, you can help speed up the appraisal process.
5. Make sure your ADUs, additional bedrooms, finished attics, and finished basements meet legal requirements
In an appraisal, bonus rooms and bedrooms must meet legal requirements to contribute to the home’s value. So don’t bother throwing a twin mattress in a walk-in closet to raise your bedroom count.
In an appraisal, bedrooms must meet the following legal requirements:
- “Finished” design features (e.g., flooring, walls, lighting, etc.)
- Windows with dimensions meeting your local building code
- A minimum size of 70 square feet with seven feet high ceilings
- Proper ventilation and heating
- Two means of egress
- All features built to code
- If applicable, the home’s septic tank capacity needs to be large enough to support the additional bedroom
Home additions and accessory dwelling units (ADUs) (e.g., guest houses and granny-flats) must also be permitted and meet legal requirements. Additions built without a permit are illegal and therefore not included in the square footage of your home. A retroactive permit could bring your ADU into compliance, and while it might take time and money, it would allow the unit’s square footage to factor into your home’s value.
6. Check public records for discrepancies with your home’s square footage
In a traditional appraisal, the appraiser calculates the home’s square footage by hand. In a drive-by appraisal, where the appraiser does not manually measure the home, the appraiser will use public records to determine the home’s square footage. This method is less accurate since public records may include dated or otherwise incorrect property details. A record may be inaccurate if the municipality has a backlog of permits or has made a clerical error, or if the homeowner repurposed or added square footage without a permit. For instance, a homeowner may have finished their garage or converted their finished garage back to a functional garage.
Keep in mind Heward’s description of appraisers as “reporters.” Public records are a reporter’s best friend, and there’s no reason they shouldn’t be yours, too. If there are discrepancies with your home’s square footage, conduct your own investigation by consulting the public records and searching for divergence. If you believe the number falls short, insist on a traditional appraisal so the appraiser can measure the true square footage and report it to the city.
7. Provide copies of any homeowners’ association or condominium covenants and fees
Transparency is the name of the game when it comes to your home appraisal process, and that includes being crystal clear about HOA fees and the like. New owners need to know about any rules or restrictions they will need to abide by, as well as the details of any dues or fees. HOA and other community fees are especially important to the buyer’s lender who needs to ensure the buyer can afford the fees on top of their mortgage.
“For mortgage lending, there are specific questions related to budget, and if the fees are typical, as well as amount of parking, etcetera. The HOA documents should provide a lot of information and should be provided to the appraiser,” says Massey. Appraisers also include the HOA details in the appraisal so lenders can evaluate the financial state of the HOA. If the HOA isn’t in good financial standing, the lender will need to know if the HOA may require homeowners to pay a higher monthly fee down the line, as this could impact the buyer’s ability to pay their mortgage.
“The mortgage company wants to know if [an HOA] owes money over on the side. That’s important,” says Miller. They also want to know if an assessment is coming up. If so, a seller may agree to pay the assessment before the sale closes.
In a special assessment, an HOA requires the homeowner to front the cost of a renovation (like a new roof) or to replenish the association’s coffers. The lender needs to know if the buyer has funds to cover the special assessment cost since these can run thousands of dollars.
8. Provide information on your solar panels
If you are one of the 6% of U.S. households with solar panels, provide your appraiser with detailed information on your system, including lease agreements or purchase receipts. Without documentation, your solar panels may complicate your appraisal process and ultimately delay closing.
Leased solar panels do not add value to your home
Heward explains: “If your panels are on lease, they’re considered ‘personal property,’ not [a part of the] real property.” That means an appraiser will not consider the monetary value of your panels when evaluating your home.
In fact, Heward warns that a leased system can even act as a detriment in your appraisal in some markets. In order for a buyer to keep a leased solar panel system, they will need to qualify for the lease. That reduces their mortgage buying power, and depending on the area, an appraiser may take that lease payment into account.
Owned solar panels add value to your home
If you own your solar panel system, it’s considered a part of your property. The appraiser will
value the system based on comps in your market.
“An appraiser will look at the market and be able to say, ‘30% of the houses in this particular area have owned solar panels, and they sold for 5% or 10% more than a house without solar did,’” Heward explains. In a place like the Valley of the Sun, where the solar market continues to grow, Heward shares that he’s seen an owned solar system increase a property’s value by as much as 3%.
9. Confirm the appraiser’s license and local experience
It’s important to work with top professionals at every step of the home selling process, and the appraisal is no exception. To earn a license, appraisers go through a state standardized training program. Still, home appraisal involves a degree of subjectivity, so it’s essential to find an appraiser with substantial experience appraising homes in your area. The more familiar an appraiser is with comps in your area, the more accurately they can assign value to your property’s upgrades and unique features.
Vet several home appraisers before you make a hiring decision. Search for candidates through The National Association of Real Estate Appraisers and the Appraisal Institute. Then ask your contenders the following questions:
- Are you licensed or certified in your state?
- What are your professional designations?
- How long have you been performing professional appraisals?
- What level of experience do you have in this particular market and this neighborhood?
- What experience do you have with properties like mine?
10. Tidy up your curb appeal
Appraisers pay attention to all of the features that add value to your home, and that includes curb appeal. While appraisers can’t necessarily put a price on curb appeal from a quantitative standpoint, they take it into account qualitatively when determining your home’s final value.
With this in mind, clean your home’s exterior and perform a basic lawn care service before the appraisal. Just remember not to run your sprinklers before the appraiser arrives. Appraisers need access to the perimeter of your house and won’t want to wade through mud to do so.
11. Provide the most recent property tax receipt or similar paperwork that contains the property’s legal description
The goal of an appraiser is to give an unbiased assessment of your property’s value. By providing your appraiser with additional public descriptions of your home, you can speed along the appraisal process by triangulating the facts. Legal descriptions, like those found in tax receipts or HOA documents, are particularly helpful because they are impartial statements.
12. Clean your home’s interior thoroughly before the appraisal
Before the appraisal, clean and declutter your home as you would for a home showing with a buyer. While the appraiser won’t increase your property value due to cleanliness, they may more favorably assess the home if it’s in overall excellent condition. The appraiser will also appreciate a clean home that allows them to measure square footage more easily.
13. Tend to repairs, especially if you’re selling to an FHA loan backed buyer
Appraisers take your home’s condition into account and look for major issues that lower your home’s value. They’ll note the condition of major home systems, including the roof, HVAC, plumbing, and electrical. An appraisal for a conventional loan is less thorough than a home inspection, so if you’ve adequately prepared for the home inspection, you should be in the clear.
“The impact on value is probably minimal. Where the impact is is whether or not [the buyer] can actually get a loan,” Heward notes. If you’re keen to close, it’s worth taking care of these repairs before your appraisal.
If you have an FHA loan backed buyer, an official FHA loan appraiser must conduct the appraisal, following HUD’s designated guidelines. In the FHA appraisal process, sellers must complete repairs that are “necessary to maintain the safety, security, and soundness of the Property, preserve the continued marketability of the property and protect the health and safety of the occupants” for their buyer’s loan to close. Examples of necessary repairs include a leaking roof, foundation cracks, and inadequate forms of egress.
You’ll also need to ensure that all appliances included in the sale are operational. According to HUD, appliances include refrigerators, ranges, ovens, dishwashers, disposals, microwaves, washers, and dryers.
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