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Anyone who has sold or bought a house is probably familiar with the home appraisal process. But for those of you who might be preparing to buy or sell a home for the first time, we have some tips to clarify any confusion you may have!
A home appraisal and a home inspection are NOT the same things. They are two separate processes for two different purposes. The appraisal’s goal is to determine the home’s value, while the inspection determines the condition of the house. Appraisals are required by lenders, which is why they will set it up for you. If you decided to have the home inspection, you would be solely responsible for the cost.
What is a home appraisal?
Home appraisals aren’t just for the potential buyer! In the real estate world, appraisals are the main component of how homes are purchased and priced. Appraisals can also help in refinancing your existing mortgage. Several people refinanced their mortgages a few months into 2020 since the housing market had favorable interest rates for homeowners. For example, “the week of March 5, the average rate for a 30-year fixed-rate mortgage hit an all-time low of 3.29%,” states Diamond Credit Union.
How do you get an appraisal?
When it’s time to have your home appraised, it’ll typically be the lender who will choose the appraiser. Most lenders use a third-party company. The purpose of doing it this way is to ensure an independent and impartial appraisal. Even though appraisals nationwide follow similar criteria, the cost can vary. An appraisal can cost anywhere from $300 to $750 and is the buyer’s responsibility. While appraisals can be expensive, on average, they cost around $500. The buyer can either pay the appraisal cost upfront or wrap it in with the closing costs, even though the lender is the one who orders the appraisal.
How can you prepare for an appraisal?
An excellent place to start is to understand what exactly is part of the appraisal process. The appraisal focuses on two sections; exterior and interior factors. The standards used during the process come from Fannie Mae’s Uniform Residential Appraisal Report, which is used by almost all appraisers in the country.
- Property Site
- Construction Quality
- Roof and Foundation Integrity
- Gutters and Siding
- Exterior Condition
- Square Footage
- Functional Layout
- Number and Size of Bedrooms, Bathrooms, and Kitchens
- Included Utilities
- Health and Safety Accoutrements
- Interior Condition
- Structural Integrity
- Code Compliance
While this is a lot of information that the appraiser will need to collect and look for, the length of time they spend at your home will mostly depend on its size. Some appraisers will be there for less than an hour, while others will be there for several hours. When the appraiser finishes, it’ll take an average of ten days to receive the report.
While the appraisal follows particular criteria, there are still steps you can take to prepare.
- Deep clean your home – this shouldn’t be too hard. If you’re at this stage of the game and selling your home, it should be in pretty good condition. But go around again and just make sure everything looks good and smells good!
- Putting away your pets – even if your appraiser is animal friendly, it makes their tasks more efficient if they can navigate through the house without distractions. You aren’t required to leave during the appraisal, but it may be more comfortable to stay out of the way. If you have some aspects of the home that may require more detail, like permits or the house’s build, or how the initial listing price came to be, it can be beneficial to have your agent present.
- Curb appeal – while the appraiser won’t be scoring your landscaping, your yard should still look neat! Make sure to cut the grass, remove any weeds, and take care of any branches or other material that can collect or look unorderly. And if you can update or touch up the paint on the exterior of your home, it makes a difference! But above all else, do not water your lawn prior to or during the appraiser showing up. Whether it’s a sprinkler system or hose hook-up, tracking mud into your home is unfavorable for everyone!
What does this mean when renovating your home?
Now that you know what they’re looking for, you know what areas of your home need attention. How does that impact any future renovations you were planning, or ones you’ve already done?
Renovations almost always bring back some portion of the initial investment. However, how much of the recouped money can range widely. Some projects see a high return on investment, while others see significantly less, even as low as 20% of the initial investment. So what renovations are valued the most, and which ones aren’t?
Renovations that add the most value to your home include minor kitchen remodels, bathroom additions, garage door replacement, and small bathroom remodels. An important thing to note here is the ‘minor’ in front of the kitchen and bathroom remodels. The amount of money homeowners put into their bathroom or kitchen remodels can easily hit $60,000. The more you spend on these two remodels, the more you spend on upscale, even gaudy, appliances, and fixtures, the less you’ll see back. Why? Simply, those high-end fixtures, countertops, or appliances aren’t everyone’s cup of tea. While yes, you should make changes that you enjoy, that doesn’t mean whoever buys your home will enjoy them. So if you’re not concerned about recouping renovation costs, go for the high-end faucet! But if you are, be modest about your renovations.
Other renovations that don’t have a high return on investments are pools, sunrooms, and garage or room additions. Most of these renovations average 60% or less return on investment. Some of this is due in part because appraisers aren’t taking fancy upgrades into account; instead, they’re focused on the basics and bones of the home.
Appraisals are a stressful, but essential part of the selling and buying process. They also give us a good indication of which renovations are worthy investments and which ones aren’t. If you’re dead set on a pool for you and your family, go for it! If you plan on spending lots of time in your home and aren’t making renovations to sell it, don’t let this deter you from making decisions that you’re passionate about. But at the same time, be realistic about what that will do for your home’s listing price when that day does come.
It’s all about finding what’s perfect for you. Each county and neighborhood has its own unique community and environment. If you can tolerate the traffic and long commute times, Northern Virginia is widely considered one of the top places in the country to raise a family.