How to Increase Appraised Value of Home for Refinance

A home appraisal for a refinance is a professional evaluation of a property’s current market value, required by lenders to determine if the home’s value is sufficient to secure the new loan. The appraised value directly influences aspects of the refinance, such as the loan amount, interest rate, and whether private mortgage insurance (PMI) will be required. A higher appraised value results in more favorable loan terms and greater flexibility for the homeowner.

Understanding Appraisal Factors

Appraisers consider several key elements when determining a home’s value for a refinance. These criteria include the property’s location, its overall size and functional layout, and its general condition. The appraiser performs a visual inspection of the home’s interior and exterior, noting structural soundness, the condition of major systems like plumbing and HVAC, and any signs of wear or damage.

Recent comparable sales, often referred to as “comps,” are another significant factor. Appraisers analyze the sales prices of similar homes in the immediate vicinity that have recently sold, typically within the last six months to a year, to establish a market-based valuation. The appraiser adjusts the value based on differences between the subject property and the comps, such as variations in square footage, lot size, age, condition, and features.

Current market trends also play a significant role in the appraisal process. Appraisers assess the supply and demand dynamics in the local real estate market, considering factors like the average time homes spend on the market and prevailing price trends. A robust seller’s market with high demand can positively influence appraised values, while a slower market might lead to lower valuations.

Strategic Home Improvements

To enhance a home’s appraised value for a refinance, homeowners can focus on strategic, cost-effective improvements that offer a good return on investment. Enhancing curb appeal is a straightforward step, involving improvements such as fresh exterior paint, well-maintained landscaping, and a welcoming entryway. These enhancements create a positive first impression for the appraiser.

Addressing essential maintenance is highly impactful, as appraisers prioritize a home’s structural integrity and functionality. This includes ensuring the roof is in good condition, that heating, ventilation, and air conditioning (HVAC) systems are functional and well-maintained, and that there are no visible signs of deferred maintenance like leaky plumbing or damaged flooring. Ensuring the roof is in good repair is important for appraisal purposes. A well-maintained HVAC system also signals a well-cared-for home.

Minor kitchen and bathroom updates can significantly boost appraised value without requiring extensive renovations. This could involve painting cabinets, replacing outdated fixtures, updating countertops, or installing new flooring. These types of updates offer a strong return on investment. Ensuring the home is clean, well-organized, and free from clutter also contributes to a favorable appraisal by presenting the property in its best light.

Preparing for the Appraisal Visit

Before the appraiser’s scheduled visit, homeowners should take steps to ensure the property is presented optimally. Thoroughly cleaning and decluttering the entire home creates an impression of meticulous care and maintenance. All areas of the home, including basements, attics, and garages, should be accessible for the appraiser to inspect without obstruction.

Gathering relevant documentation can provide the appraiser with valuable context. This includes copies of permits for any major renovations or additions, such as a new deck or a finished basement. A detailed list of significant upgrades made since the home’s purchase should also be prepared, including new windows, updated appliances, or a renovated kitchen.

Highlighting energy-efficient improvements, such as solar panels, upgraded insulation, or high-efficiency windows, can be beneficial, as these features contribute to a home’s overall value. Any other unique features or selling points of the home, like smart home technology, custom built-ins, or professional landscaping, should be documented. During the visit, homeowners should be present to answer questions and provide information about these improvements, but it is important to provide factual details without attempting to influence the appraiser’s professional judgment.

Navigating the Appraisal Outcome

Once the appraisal visit is complete, the appraiser will compile their findings into a formal report and submit it to your lender. Homeowners receive a copy of this report and should review it carefully for accuracy. The review should focus on identifying any factual errors, such as incorrect square footage, a miscount of rooms, or misidentified property features.

Particular attention should be paid to the comparable sales used in the report. Verify that the chosen comps are truly similar in size, age, condition, and location to your property. If you find discrepancies or believe more appropriate comparable sales exist that were not included, this information can be used to request a reconsideration.

Should the appraised value come in lower than expected, and you identify factual errors or more suitable comps, you have the option to request an appraisal reconsideration through your lender. This process involves submitting a formal request, along with supporting documentation, to the lender. The lender will then forward this information to the appraiser for review. While there is no guarantee the value will change, a well-supported reconsideration request, focusing on objective data, can sometimes lead to an adjustment.