What Do Appraisers Look for When Refinancing?

When refinancing a mortgage, a home appraisal plays a significant role. It provides an objective opinion of the property’s market value, crucial for lenders. This valuation helps lenders assess risk and determine the appropriate loan-to-value (LTV) ratio. The appraisal ensures the loan amount aligns with the property’s worth, as the home serves as collateral. A successful appraisal impacts refinance terms, including interest rates and potential private mortgage insurance requirements.

Interior and Exterior Property Condition

Appraisers evaluate the physical aspects of a home, starting with curb appeal. The exterior, including the roof, siding, windows, and foundation, is inspected for wear, damage, or deferred maintenance. Features like decks, patios, or detached structures, such as garages or sheds, are assessed for condition and value.

Moving inside, the appraiser examines the layout and functionality, noting the number of bedrooms and bathrooms, and total square footage. The quality of construction materials and the condition of major systems like HVAC, plumbing, and electrical are considered. Recent updates or renovations, such as remodeled kitchens, bathrooms, or new flooring, are factored into the valuation, especially if they enhance functionality or align with market expectations.

Location and Site Attributes

Beyond the physical structure, a property’s location influences its appraised value. Appraisers consider neighborhood desirability, including proximity to amenities like schools, shopping centers, transportation hubs, and parks. Market trends within that area, such as growth patterns and demand, are also considered.

Site attributes also contribute to value. The size, shape, and topography of the lot are evaluated, along with views or access points. External influences, such as proximity to busy roads, commercial properties, power lines, or environmental factors like flood zones, can impact marketability and value.

Comparable Sales Analysis

Appraisers determine a home’s value using the sales comparison approach, which relies on “comparable sales” or “comps.” These are recently sold properties similar to the subject property in characteristics and located within the same market area. Appraisers select at least three closed sales from the last six to twelve months, ideally within a one-mile radius in urban or suburban areas.

Appraisers then make adjustments to the sale prices of these comparable properties to account for differences. For example, if a comparable property has an extra bathroom or a larger lot, a downward adjustment is made. Conversely, an upward adjustment is applied if the subject property has a superior feature, such as a recent remodel or energy-efficient upgrades. These adjustments ensure accurate comparison, establishing a reliable baseline for valuation.

Facilitating the Appraisal Process

Homeowners can assist the appraiser in assessing their property’s value. Prepare a list of significant home improvements, including completion dates and costs. This includes major renovations like a kitchen remodel, or updates such as a new roof or HVAC system.

Having relevant property documents available can streamline the process. These include a plat map, permits for additions or major renovations, or a recent previous appraisal report. Ensure the home is accessible and well-maintained for inspection, including decluttering and light cleaning. Be available to answer questions about the property’s history, unique features, or specific characteristics, providing accurate information for a thorough evaluation.