What hurts a home appraisal?

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When it comes to what hurts a home appraisal, some of the main factors include updates that were needed but weren’t made, comparable properties, your home’s location and whether you hired an inspector to flag any issues or necessary repairs. By getting out ahead of the factors within your control before an appraisal, you may get a more favorable answer to the all-important question of what your house is really worth.

 

The more you know and understand about the home appraisal process, the better. Here’s a crash course of sorts on the process and what negatively affects home appraisal.

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Related: Home affordability calculator

A Primer on Home Appraisals

home appraisal reveals the fair market value of a home, which is important whether you’re buying, selling or refinancing a mortgage. An appraisal can also be used to determine property taxes. Lenders require appraisals because they ensure that the lender won’t offer you a loan that’s more than what the home is worth.

 

So, what do appraisers look for when they do a home appraisal? A real estate appraiser, who is a third party licensed or certified by the state, will review a home inside and out, looking at a home’s age, size, foundation, appliances and neighborhood, among other things. They will then compare the house to other comparable homes in the area to assess its value.

 

An appraisal is usually required by a lender when a buyer is getting a mortgage or when someone is refinancing their mortgage. If an appraisal is for a home sale, neither the buyer nor the homeowner can be present. When someone is refinancing, on the other hand, the homeowner is permitted to attend. That no doubt is a plus as it’s an opportunity for the homeowner to ensure the appraiser takes note of any upgrades and new features that could increase their home’s worth.

Things That Can Hurt Your Home Appraisal

Much hinges on the appraisal, so you’ll want it to go as smoothly as possible. Start by knowing what hurts a home appraisal so you can avoid any hiccups that could prevent you from getting the highest value for your home.

1. Much-Needed Updates That Never Happened

If you’ve been putting off any needed upgrades, this is when it could come back to bite you. Let’s say you’ve been meaning to renovate your kitchen and somehow just didn’t get around to it. A kitchen that looks pretty much like it did 30 years ago isn’t going to wow anybody, least of all an appraiser who will wonder what else is in decline.

 

While it can be helpful to take care of some common home upgrades that can net you a return on your investment, you don’t necessarily want to go crazy updating either. Not only could it be tougher to recoup all the money you put into home improvements, you may find that while you love the changes you’ve made, your taste may not have universal appeal. It’s a delicate balance to make upgrades that will get two thumbs up from the appraiser and the potential buyers.

2. Comparable Properties

When it comes to housing, you do kind of have to keep up with the Joneses. With appraisals, it’s all about sales of comparable homes over the last 12 months. What are homes similar to yours on your street or a few blocks over selling for? If they are getting top dollar that will push up the price of your home. On the flip side, if those homes are hanging around on the market for months and selling at prices below expected, that could put a drag on what you can get for yours.

 

Comparable sales help determine the market, which is why both your real estate and your appraiser will look at them. Ideally, the appraiser, as much as possible, is comparing apples to apples so you get a fair appraisal. The other properties should be similar in size, age and amenities, among other factors. It’s a losing proposition for you if the appraiser goes for the extreme, say a house that sold at a bargain because someone was in a hurry to bail for whatever reason.

3. Skipping a Home Inspection

When it comes to your house, ignorance is not bliss. While you may know when you need to make a repair to a leaky roof, for instance, there can be plenty wrong that’s not obvious to you. That’s why it’s a good idea to have a home inspection before you put your house on the market.

 

A home inspector can suss out all manner of malfunctions that could be plaguing your house, particularly things you may be clueless about. If you get bad news, think of it as good news since you’ll now have the opportunity to make necessary home repairs before you put your house on the market and an appraiser comes with a magnifying glass of sorts looking for signs of trouble.

4. An Undesirable Location

Few things matter more in real estate than location. If you’re in a neighborhood that’s seen as flawed or your house is on a busy or noisy street, that could all come into play when it comes to the value of your property.

 

Location also counts within your home. If your layout is dated — say it’s old-fashioned and highly compartmentalized instead of today’s more in-demand open layout concepts — that could be less attractive to buyers. Or they might only be interested in knocking down walls and reconfiguring the space, which likely means they’ll want to pay less for the house if they are going to have put money into it to bring it in line with what they’re looking for.

4 Ways to Prevent Low Home Appraisals

Just like there are some things you can get out ahead of before they hurt your home appraisal, there are also some moves you can make to prevent your home appraisal from coming in lower than you’d like.

  1. Hire your own appraiser: Typically, the lender hires the appraiser. However, there’s no reason you can’t hire your own appraiser before the sale. Your realtor should have a handle on someone who is experienced and has a reputation for giving fair estimates. You then can ask the buyer or lender’s appraiser to review what your appraiser produced.
  2. Provide records: If you have records of repairs and upgrades that’s the kind of proof that works in your favor. It also doesn’t hurt to have documentation like photos — before and afters aren’t just for an Instagram post of your new haircut.
  3. Prepare for the appraiser’s visit: Don’t dismiss the importance of maintaining curb appeal. Your home should be clean inside and outside before the appraiser comes over. Strive to get as close to an interior design catalog as you can.
  4. Dig up property comparables on your own: You don’t have to leave it to the appraiser and real estate agents to do all the homework. Go the extra mile and consider calling real estate agents with homes in escrow to get the sales prices. Create a list that you can pass along to the appraiser.

Checking Your Home Value Without an Appraisal

You can get a sense of what your home is worth even if you don’t get an appraisal. There are several websites that can give you valuable insight into your home’s potential value, including Zillow, Trulia, Redfin, Realtor.com and Eppraisal, among others.

 

Another option is to use a house price index (HPI) calculator, which relies on data from mortgage transactions over time to estimate a home’s value. Projections are based on both the purchase price of the home and the changing value of other homes nearby. This tool can help you see how much a house has appreciated over time. You’ll also get a glimpse of estimated future changes in mortgage rates.

The Takeaway

Because your home is likely your biggest asset, it’s worth putting the time and effort into the appraisal process. The payoff could be huge if you tend to the major factors that hurt an appraisal or get proactive about preventing a low appraisal.

 

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This article
originally appeared on 
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The home buying process, explained

 

Purchasing a house or condo can be pretty complicated, but having a blueprint of the normal process can steady your nerves.

 

The journey can seem especially mystifying if you’re a first-time buyer since everything is likely to be new to you. First-time buyers made up 31% of all recent home buyers, according to the 2021 generational trends report from the National Association of Realtors (NAR).

 

The report also found that what it defines as millennials, buyers ages 22 to 40, continue to make up the largest share of homebuyers, 37%.

 

Related: Open house tips for homebuyers

 

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First, you’ll want to keep it real in your real estate search. To that end, here’s a home affordability calculator. Then here are the steps you can expect in the home-buying process.

 

depositphotos.com

 

Before you start the search, consider the type of home you’d like to buy and what neighborhoods you’d want to live in. Then do some research to see what similar homes have sold for in the recent past. That should give you an idea of whether your resources align with your dream house or whether you need to reevaluate.

 

It’s good to know how much of a down payment you’ll need and what it will take to qualify for a home loan.

 

Lenders typically give great weight to your credit score and debt-to-income ratio. Most will also be looking to verify your income and at least two years’ worth of steady employment or consistent and ongoing income.

 

Most conventional mortgages—those originated by private lenders—require a down payment of at least 3%. An FHA loan requires as little as 3.5% down, and a VA loan, usually nothing down.

 

Putting less than 20% down on almost any purchase will mean ongoing fees or, in the case of a VA loan, a one-time fee.

 

Deposit Photos

 

Next, you’ll need to figure out what kind of home you can afford. One way to do this is by getting prequalified with a mortgage lender. Using self-reported information, the lender reviews the basics of your financial situation and provides an estimate of how much you may be able to borrow and at what rates.

 

Getting prequalified with several lenders can help you get a sense of what kind of home you can afford and allow you to compare monthly payments and interest rates.

 

DepositPhotos.com

 

It’s not required, but the vast majority of house hunters purchase a home through a real estate agent or broker.

 

You can hire either a Realtor or a real estate agent to assist you in your search. Both are licensed professionals. The main difference is that a NAR member is required to stick to a code of ethics that includes putting a client’s interests before their own.

 

Agents only get paid when you close on a home. The seller typically pays the real estate commission for both the listing agent and buyer’s agent.

 

A real estate agent will help you find property listings that fit your preferences, visit them to make sure they’re up to snuff, write offers and counteroffers, attend inspections, help you negotiate, and work with you to deal with any obstacles that emerge.

 

When looking for an agent, you can ask people you know for recommendations, note the names on signs in your area, and read reviews online. You may want to speak to several agents until you find one who feels right and may be considered an expert in the area where you want to buy.

 

Kritchanut/ istockphoto

 

Once you’re ready to start seriously looking for a home, unless you’re a cash buyer you’ll need to lock down funding. You can do this by getting preapproved with a mortgage lender. This is a more involved process than prequalification.

 

You’ll fill out a detailed application and allow the lender to do a hard credit check and verify your finances.

 

When you’re preapproved for a mortgage, you will know exactly how much you can most likely borrow and at what terms. That’s because the entire credit portion of the loan has been verified.

 

Remember that you don’t have to take out the highest amount you qualify for if you find a more affordable home. In that scenario, you’d just ask your lender to adjust the preapproval letter based on the actual bid you’re making on a home.

 

Showing a seller the lender’s preapproval letter (typically valid for 90 days) can help you rise above the pack if multiple offers are in play.

 

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Next, it’s time to start shopping for a house or condo or buying into a co-op. If you have an agent, you’ll probably sit down and outline the parameters of what you’re looking for. Then the agent will start bringing to your attention properties that might fit the bill, and you’ll attend viewings and open houses.

 

But these days, there’s also a lot more you can do to jumpstart your home search on your own. Websites like Zillow, Trulia, Redfin and others can help you find out about properties as soon as they’re on the market.

 

If you’re moving forward without an agent, you can consider exploring platforms that have cropped up to help buyers who don’t have agents.

 

Fotoamator/ istockphoto

 

Once you find the perfect home, you’re ready to make a formal purchase offer. This involves not only letting the seller know how much you’re willing to pay but providing evidence that you’ll be able to afford those costs and when you expect to close on the house. The offer also details what you expect the seller to do before closing.

 

At this stage, many buyers also provide earnest money, a deposit that can be up to 10% of the negotiated price. The offer might also include contingencies, which are conditions that need to be met in order for you to proceed with the transaction.

 

Some contingencies, like a home or roof inspection, are usually at the buyer’s discretion. Others, like a home appraisal, can be tied to the loan approval.

 

Depositphotos

 

Once you and the seller are on the same page about a price, the house goes into escrow. That involves a third party, namely an escrow officer, making sure that both of you meet the conditions you’ve agreed to.

 

Your real estate agent will help make sure any home inspection you ordered takes place. If there are unwelcome surprises, the agent might need to help you renegotiate the selling price. Depending on the severity of the surprise—if a significant home repair is needed, for example—the lender might require a complete fix before escrow closes. Once that’s all set, and all income, assets, and property conditions are signed off on by the underwriter, you will be issued final loan approval.

 

Next, you’ll sign the needed paperwork to take out the mortgage and finalize the home purchase. It can take a few days for the purchase money to reach the seller and for the county records to reflect the transfer of the sale.

And then the house is all yours! Move in and enjoy.

 

Vladimir Vladimirov

 

Buying a home isn’t a cakewalk, but the path is much smoother when you know the steps involved.

 

Learn more:

 

This article originally appeared on SoFi.comand was syndicated by MediaFeed.org.

 

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