What is a home appraisal?

Before you complete the home buying or selling process, it’s required that you first get an appraisal, which gives an estimate of the value of the home.

The findings from an appraisal determine the amount a mortgage lender will let you borrow for the property, while also protecting you from paying more than the house is worth.

The appraiser determines the home’s worth based on factors such as:

Location
Condition
Neighborhood comparables, which are sales of local houses similar to yours

An appraiser will also look for any health or safety concerns in the home. If a significant number of red flags are raised this could halt the home buying or selling process.

Whether you’re looking to buy or sell a home, it is important to know what appraisers look for during an appraisal.

How Do I Prepare for a Home Appraisal?

Commonly confused with a home inspection, the goal of a real estate appraisal is to determine the value of a property, referred to as market value. A home inspection seeks to find the flaws in a home, like problems with the foundation, furnace or roof. While a home appraiser considers these issues, their main goal is to determine the worth of a home.

Here’s a list of what a home appraisal will entail to determine the market value of the home:

The value of local comparables that are similar to your home
A full appraisal report based on the inspection and comparables to determine the home’s estimated value

What Do They Look for in a Home Appraisal?

During the physical inspection portion of the home appraisal, the appraiser considers both the interior and exterior of a home to get the best value of the house.

Exterior-wise, the appraiser will consider:

The total land area or acreage of your property
The condition of the property
Any lead or peeling paint, but only if the house was built prior to 1979

Interior-wise:

Working furnace
Working air conditioning
Number of rooms, as well as windows and closets
Garage, although it does not contribute to square footage of the home
Updates in the basement, although it does not contribute to the square footage of the home
Built-in appliance upgrades
In-ground pool, if applicable

If there are any ongoing upgrades or repairs of the home, make sure that they are fully completed before an appraisal is scheduled. Unfinished projects reflect poorly on the home value.

The same goes for the presentation of the home. While an appraiser cannot take the overall cleanliness and style into account, the estimated value of the home may be influenced by holes in the wall or peeling paint.

Based on the appraiser and the condition of your home, the physical inspection part of the appraisal can take anywhere from 25 to 45 minutes to complete.

Home Appraisal Checklist

In addition to checking the exterior and interior condition of the home, the appraiser will also look for anything needing repairs. If you are selling the home or refinancing your home, this is something that you could do to prepare for the appraiser’s visit:

Check your electric garage door opener to make sure it’s working
Secure a handrail on steps or stairwells
Secure second floor doors with decks
Secure a railing to any and all raised decks
Ensure all utilities are functional with no safety issues
Ensure water, electricity and air conditioning is functional
Address any plumbing, roof leaks or stains
Check for cracks in the walls, ceiling or foundation
Check for water intrusion through the foundation
Ensure your roof is sound and has at least three years of economic life remaining

This is by no means a complete checklist of repairs that might need to be addressed before a home appraisal. It is, however, a list of the most common issues that may arise either before or during the appraisal inspection.

What is an FHA Home Appraisal?

FHA home appraisals are slightly different. If you’re looking to get an FHA loan, many repairs must be completed prior to closing. This impacts both the buyer and the seller because the home loan process absolutely cannot progress until a few repair items are met. Let’s discuss what those are:

FHA Appraisal Checklist

Other than the normal health and safety concerns addressed in a normal home appraisal inspection, FHA loans require:

Exposed floorboards and wall studs to be secured
Chipped or peeling paint, especially lead-based paint if built before 1979, must be scraped and painted
Water damage must be addressed, including any plumbing, roof or foundation issues associate with the damage
Holes in the roof or siding must be repaired
Driveway or sidewalk damage must be corrected
An outlet within 10 feet of a water source that has only a regular two-prong plug
A grounded plug or a GFI outlet designed for bathrooms, kitchens, garages and anywhere outside where you need an electrical outlet must be installed

Any red flags raised during the appraisal inspection need to be fixed before closing. There are two ways to compensate an FHA repair with the second one being the most common resolution:

The buyer agrees to pay for the repair upon the event of the seller lowering the price of the house to compensate for the cost of the repairs
The seller agrees to pay for the repair as part of the purchase agreement; all repairs must be completed before the loan can close

VA Home Inspection Checklist

Like FHA appraisals, VA home appraisal inspections have their own standards for acceptable home conditions. In addition to the standard, conditional loan appraisal requirements, VA home appraisals will require:

Clean drinking water, a water heater and a sewage system
Working electricity, heating and air conditioning
Sound roofing
Sound foundation
Pest and termite inspection
Appropriate living spaces, including the bedroom, living room and kitchen

Just like FHA or conventional home appraisal, any repairs or safety or health concerns will slow down and possibly put a halt to the home buying process until they are addressed by either the buyer or seller.

A home appraisal must be completed by a VA-certified appraiser, assigned by the Department of Veterans Affairs.

Is an Appraisal Required for a Conventional Loan?

It’s also important to know when you’re able to skip the appraisal process entirely.

The short answer is that Freddie Mac and Fannie Mae offer the ability to skip the appraisal on certain types of purchase and refinance loans using appraisal waivers – a document that allows you to move your loan process along without an official appraisal. When you are putting down 20%, have excellent credit and a low debt-to-income ratio, there is a good chance that a lender will allow you to forego the appraisal.

However, only about 50% of the loans qualify for a waiver.

For example, Fannie Mae loans require a property inspection waiver in order to waive an appraisal, while Freddie Mac offers what is called an automated collateral evaluation. Both Freddie Mac and Fannie Mae have the ultimate discretion on whether or not they’ll be able to offer a waiver at any time, so it’s best to speak to your loan officer to determine if you qualify.

The Next Steps After a Home Appraisal

After your home appraisal is complete, the appraiser will assign a monetary value to the property based on the findings in the inspection and the comparables in your area and then send their findings to the mortgage lender.

Your loan amount will be based on the number that the appraiser assigns to the property, so if they say the home is worth $190,000, your lender will only loan that exact amount. This is unfortunate for the seller if they have the home listed at a higher price, as the lower home appraisal will affect their chances of getting that amount on the home loan.

Relevant links:

Our loan application can be found here or you can call us at 314-329-7314 to speak with one of our loan officers. Also, here is our pre-approval page, if you are looking to buy a home.

Posted by: Carlson Mortgage – a St. Louis mortgage broker providing home loans in the state of Missouri. We are routinely ranked as a #1 mortgage broker in Missouri on Yelp, Google and Zillow. We can be reached at (314) 329-7314 seven days a week. Let us be your source for some of the lowest mortgage interest rates in St. Louis on first-time home buyer, conventional, FHA, Veterans (VA), Jumbo and condominium (condo) financing. Since 2004, we’ve been providing home loans and mortgage services in St. Louis that are tailored individually to your unique needs and to your financial situation. Our loan officers speak English, Spanish and Russian. Call us today to inquire about home loan interest rates, to get pre-approved for a purchase or a refinance mortgage, or if you have any general mortgage lending questions.