The Appraiser’s Coming… What Should I Do?

With interest rates at an all-time low, it’s not only a great time to buy a house, it’s an even better time to re-finance the loan you have. Refinancing a loan is, in most cases, going to require an appraisal. And the higher the appraisal, the better for the borrower. So what can you do to get your highest appraisal value?

The first two things you need to remember are:

  • an appraisal is an OPINION of value and
  • there are laws that limit what you can do to affect that opinion

An appraiser’s opinion is essentially an educated guess. He/She will gather data about the marketplace and compare that data to what they see when they do their inspection of your home.

Before the Taft-Hartley Act was passed after the most recent real estate crash, appraisers were given an estimated value of a property and the loan amount by the lender (who is ordering the appraisal). It told us what value the lender needed in order to make the loan terms work out for the lender and the borrower. This is now illegal. It is illegal for the lender or the homeowner to provide this number.

So what can you do to maybe sway the appraiser to the higher end of the scale?

  • Provide data of comparable properties.

If you know a real estate professional who has access to the multiple listing service in your area, they can do a search for properties that have recently sold or are listed for sale that they think are similar to yours. There is no guarantee that the appraiser will use these. If they don’t use them, you can ask them to explain why. When you give them this data, explain where it came from and that “you thought it might help.”

  • Tell the appraiser how much it appraised for last time.

Even better is to share the last appraisal with them. This is just more data. If the last appraisal was over one year ago, the value won’t really matter but some appraisers will note the information.

  • Make a list of recent updating.

This is important for any big improvements you’ve made in the past 15 years. These should only be big-ticket items like new windows, new kitchens or bathrooms, updated appliances, new furnace or water heater, upgraded insulation, new roofs and new exterior paint. Make sure you put the date (month and year are enough).

  • Clean the house.

Appraisals these days require photos of the outside of the house and every room inside the house – so clean up. I’m not talking about professionally clean – it doesn’t have to look like a new home – but get the dirty dishes off the counter and clean the litter box. I was in a house that had dishes stacked on every inch of the counter, other boxes stacked around every wall and the owners were eating dinner on TV trays in the living room. I have been in a number of homes that smelled so bad that I almost threw up. The first thing I think when I’m in a place like this is “what else is wrong that I can’t see?”

  • Finish whatever renovations you are doing before I get there.

I have heard a number of times that “we are refinancing so we can finish remodeling the bathroom.” If you’ve been working on the bathroom for two years, I’m not buying it. Get it done, then recover that expenditure with your refinancing. I have to appraise what I see.

Here are some things you shouldn’t do:

  • Don’t disrupt the appraiser’s standard process.

Don’t follow the appraiser around the house and tell them about every little thing you did. Appraisers are busy people, on a schedule, who have a process for doing inspections. The biggest problem I have is in taking the required pictures that go in the appraisal. Photos of the house CAN NOT have people in them. You can have all the animals you want in the photo but no people. So make sure the house is as un-populated as possible.

I have instances where a person walks out the front door while I’m shooting the exterior photo (making it unusable). I forgot to retake the picture later, so I had to drive back to the property two days later to take another photo. It was a property in the mountains that was an hour from my office. I’ve also had situations where someone was sleeping in the middle of a room, again making a photo a big problem.

  • Don’t ask the appraiser how much they think your house is worth when they are about to leave.

First of all, it is illegal for the appraiser to give a value estimate to anyone but their client, who is the lender. I understand that you may have already paid the lender for the appraisal but the lender is the one who placed the order. Second, the appraiser honestly doesn’t know. They still have to drive by the properties they are going to compare yours to and type up the forms which include an adjustment grid, which allows them to arrive at a final, mathematically-based value.

Appraisals are an opinion of value of the way the house looks the day the appraiser looks at it. A sad thing about a lot of appraisers is that they are cold and reclusive so be prepared to be ignored.

Hopefully you get someone who gives your home the attention it deserves and does a good job. If all goes well, the appraiser will lean toward the higher end of his potential values and you will get the new loan you want.

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